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Share Name | Share Symbol | Market | Type |
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Mead Johnson Nutrition Company (delisted) | NYSE:MJN | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
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0.00 | 0.00% | 89.98 | 0 | 01:00:00 |
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TABLE OF CONTENTS
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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MEAD JOHNSON NUTRITION COMPANY
2701 Patriot Boulevard
Glenview, Illinois 60026
(847) 832-2420
April 4, 2016
Dear Fellow Stockholder:
We are pleased to invite you to attend our Annual Meeting of Stockholders (the "Annual Meeting") to be held at The Glen Club, 2901 W. Lake Avenue, Glenview, Illinois 60026, on Wednesday, May 11, 2016, at 9:00 a.m. Central Daylight Time.
Details of the business to be conducted at the Annual Meeting are included in the attached Notice of Annual Meeting of Stockholders and Proxy Statement.
Whether or not you plan to attend in person, you can ensure that your shares are represented at the Annual Meeting by promptly voting and submitting your proxy by Internet or by telephone or by signing, dating and returning your proxy card in the enclosed envelope. If you attend the Annual Meeting, you may revoke your proxy and vote in person.
Sincerely,
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James M. Cornelius | Peter Kasper Jakobsen | |
Chairman of the Board of Directors | President and Chief Executive Officer |
MEAD JOHNSON NUTRITION COMPANY
2701 Patriot Boulevard
Glenview, Illinois 60026
(847) 832-2420
NOTICE OF 2016 ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 2016
9:00 a.m. Central Daylight Time
Notice is hereby given that the 2016 Annual Meeting of Stockholders (the "Annual Meeting") of Mead Johnson Nutrition Company (the "Company") will be held at The Glen Club, 2901 W. Lake Avenue, Glenview, Illinois 60026, on Wednesday, May 11, 2016, at 9:00 a.m. Central Daylight Time, for the following purposes:
Information relating to the above matters is set forth in the attached proxy statement. Only stockholders of record at the close of business on March 21, 2016 will be entitled to vote at the Annual Meeting.
You are cordially invited to attend the Annual Meeting in person. However, to ensure that your vote is counted at the Annual Meeting, please vote as promptly as possible.
By order of the Board of Directors, | ||
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Patrick M. Sheller
Senior Vice President, General Counsel and Secretary |
April 4,
2016
Glenview, Illinois
Important Notice Regarding the Availability of Proxy Materials for the
Annual Meeting of Stockholders to be Held on May 11, 2016
The Proxy Statement relating to our 2016 Annual Meeting of Stockholders, the Proxy Card and our Annual Report on Form 10-K for the year ended December 31, 2015 are available at www.meadjohnson.com/proxymaterials.
Please vote as promptly as possible by using the Internet or telephone or by signing, dating and returning the proxy card. If you plan to attend the meeting, please follow the instructions set forth on page 5 of the attached proxy statement.
MEAD JOHNSON NUTRITION COMPANY
2701 Patriot Boulevard
Glenview, Illinois 60026
(847) 832-2420
PROXY STATEMENT
FOR THE 2016 ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 2016
The board of directors (the "Board") of Mead Johnson Nutrition Company (referred to herein as "we," "us" or the "Company") solicits your proxy to vote at the 2016 Annual Meeting of Stockholders (the "Annual Meeting") to be held at The Glen Club, 2901 W. Lake Avenue, Glenview, Illinois 60026, on Wednesday, May 11, 2016, at 9:00 a.m. Central Daylight Time, and at any adjournments or postponements thereof. This proxy statement (the "Proxy Statement") is first being released to stockholders by the Company on or about April 4, 2016.
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If you or another stockholder of record with whom you share an address wish to receive a separate Form 10-K or Proxy Statement, we will promptly deliver it to you if you request it by calling Broadridge Financial Solutions, Inc., toll-free in the United States at 1-866-540-7095 or by writing to Broadridge Financial Solutions, Inc., Attn. Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you or another stockholder of record with whom you share an address are receiving multiple copies of the Form 10-K and Proxy Statement, you can request to receive a single copy of these materials in the future by contacting Broadridge Financial Solutions, Inc. in the same manner as described above.
Beneficial Owner of Shares Held in Street Name . If your shares are held in an account at a brokerage firm, bank, broker-dealer or other similar organization, then you are the beneficial owner of shares held in "street name," and the proxy materials were forwarded to you by that organization. The organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to instruct that organization on how to vote the shares held in your account.
Beneficial owners may vote by telephone or Internet if their bank or broker makes those methods available, in which case the bank or broker will enclose the instructions with the proxy materials.
For further instructions on voting, see your proxy card. If you vote by proxy using the paper proxy card, by telephone or through the Internet, the shares represented by the proxy will be voted in accordance with your instructions. If you attend the Annual Meeting, you may also submit your vote in person, and any previous votes that you submitted by mail, telephone or Internet will be superseded by the vote that you cast at the Annual Meeting. Please note, however, that if your shares are held of record by a broker, bank or other
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nominee and you wish to vote at the Annual Meeting, you must obtain from the record holder a legal proxy issued in your name.
In order to direct the plan trustee to vote the shares held in your account, you must vote the shares by 10:59 p.m. Central Daylight Time on May 6, 2016. If your voting instructions are not received by that time, the trustee will vote the shares credited to your account in the same proportion as the plan shares for which voting instructions have been received, unless contrary to the Employee Retirement Income Security Act of 1974. Please follow the instructions set forth above for voting of stockholders of record to cast your vote. Although you may attend the Annual Meeting, you may not vote shares held in your Mead Johnson Nutrition Company Retirement Savings Plan account at the Annual Meeting.
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then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement, and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting.
Beneficial Owners of Shares Held in Street Name . If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of the New York Stock Exchange (the "NYSE"), the organization that holds your shares may generally vote on "routine" matters but cannot vote on "non-routine" matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares.
The election of directors (Proposal No. 1) and the advisory vote to approve the compensation paid to our named executive officers (Proposal No. 2) are matters considered non-routine under NYSE rules. A broker or other nominee cannot vote without instructions from beneficial owners on non-routine matters, and therefore there may be broker non-votes on Proposals Nos. 1 and 2.
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and to facilitate a successful proxy solicitation. Occasionally, stockholders provide written comments on their proxy cards, which may be forwarded to our management and the Board.
Stockholders may present proposals that are proper subjects for consideration at an annual meeting, even if the proposal is not submitted by the deadline for inclusion in the proxy statement. To do so, the stockholder must comply with the procedures specified by our bylaws. Our bylaws require all stockholders who intend to make proposals at an annual meeting of stockholders to submit their proposal to the Corporate Secretary not fewer than 120 and not more than 150 days before the anniversary date of the previous year's annual meeting; provided, however, that in the event that the date of the annual meeting is more than 30 days earlier or more than 60 days later than such anniversary date, notice by the stockholder to be timely must be received not earlier than 120 days prior to such annual meeting and not later than the later of 90 days prior to such annual
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meeting or 10 days following the day on which the public announcement of the date of such annual meeting is first made.
To be eligible for consideration at the 2017 annual meeting, proposals that have not been submitted by the deadline for inclusion in the proxy statement and any nominations for director must be received by our Corporate Secretary on or after December 12, 2016 and on or before January 11, 2017. This advance notice period is intended to allow all stockholders an opportunity to consider all business and nominees expected to be considered at the meeting.
All submissions to, or requests of, the Corporate Secretary should be made at our principal executive offices at 2701 Patriot Boulevard, Glenview, Illinois 60026.
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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our business and affairs are managed under the direction of our Board. Among other oversight responsibilities, our Board reviews the Company's strategic plans and monitors performance toward our strategic objectives. Our Board consists of the 13 members listed below.
Our Board is composed of a diverse group of leaders in their respective fields, most of whom have leadership experience at major companies with global operations, as well as experience on other companies' boards, which provides an understanding of different business processes, challenges and strategies. Others have experience as members of significant academic and research institutions, which brings unique perspectives to the Board. The Company's directors also have other experience that makes them valuable members, such as nutritional, scientific, finance, compliance, social responsibility and consumer products experience that provides insight into issues faced by the Company.
The Nominating and Corporate Governance Committee and the Board believe that the above-mentioned attributes, along with the leadership skills and other experiences of its Board members described below, provide us with the perspectives and judgment necessary to guide our strategies and monitor their execution.
Set forth below is biographical information concerning our directors as of March 21, 2016.
Name
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Position(s) | |
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Steven M. Altschuler, M.D. | Director | |
Howard B. Bernick | Director | |
Kimberly A. Casiano | Director | |
Anna C. Catalano | Director | |
Celeste A. Clark, Ph.D. | Director | |
James M. Cornelius | Director and Chairman of the Board | |
Stephen W. Golsby | Director | |
Michael Grobstein | Director | |
Peter Kasper Jakobsen | Director; President and Chief Executive Officer | |
Peter G. Ratcliffe | Director | |
Michael A. Sherman | Director | |
Elliott Sigal, M.D., Ph.D. | Director | |
Robert S. Singer | Director |
Steven M. Altschuler, M.D. | Director Since 2009 | ||
Age 62 |
Dr. Altschuler is the president and chief executive officer of the University of Miami Health System and has served in this position since January 2016. He was the former chief executive officer of The Children's Hospital of Philadelphia, a position he held from April 2000 through his retirement in June 2015. Dr. Altschuler serves as a director of Weight Watchers International, Inc., where he is a member of the audit and compensation committees, and he serves as chairman of the board and a member of the nominating and corporate governance committee of Spark Therapeutics. He also serves as a member of the board of directors of the Free Library of Philadelphia and the GAVI Campaign. In addition to his many years in a leadership position at a leading institution in pediatric medicine, Dr. Altschuler has clinical and research experience in pediatric medicine, as well as experience as an outside director of charitable organizations.
Howard B. Bernick | Director Since 2009 | ||
Age 63 |
Mr. Bernick is currently the president of Bernick Advisory Limited, a private investment advisory company, and has served in such a role since November 2006. From November 1994 to November 2006, Mr. Bernick served as president and chief executive officer and a director of Alberto-Culver Company, a global branded consumer products and beauty supply distribution company. From August 2001 through October 2008, Mr. Bernick served as
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a director of the Wm. Wrigley Jr. Company, a global confectionery company, until its acquisition by Mars Inc. Mr. Bernick serves on the board of directors of The Duchossois Group, Inc., is a member of the board of trustees of The Field Museum in Chicago and serves as a director of the Juvenile Diabetes Research Foundation. In addition to his global business experience as former president and chief executive officer of a global branded consumer products company, Mr. Bernick has outside board experience, has served in an advisory capacity to various companies and has private investment advisory experience.
Kimberly A. Casiano | Director Since 2010 | ||
Age 58 |
Ms. Casiano is an advisor to top business leaders targeting the Hispanic market. From 1994 to 2009, Ms. Casiano was president and chief operating officer of Casiano Communications, Inc. one of the largest Hispanic publishers of magazines and periodicals in the United States. Ms. Casiano has held various management positions at that firm since she joined in 1988, including leading the sales and editorial functions for consumer publications and managing the company's bilingual direct marketing, customer relationship management and multi-media contact center division. Prior to that, she managed her own company, Caribbean Marketing Overseas Corporation, to foster trade and investment in the Caribbean and Latin America. She has served on the board of directors of Ford Motor Company since 2003, including as a member of the audit committee, nominating and governance committee and sustainability and innovation committee, having previously served on the finance committee. Ms. Casiano also serves on the board of directors of Mutual of America and the Hispanic Scholarship Fund. In addition to her media, marketing and Hispanic market experience as a president and chief operating officer of the largest Hispanic publisher of magazines and periodicals in the United States, Ms. Casiano has global business experience managing her own company, as well as outside board experience.
Anna C. Catalano | Director Since 2010 | ||
Age 56 |
Ms. Catalano has over 30 years of corporate experience, of which over 20 years were spent in the energy industry, serving in various marketing, operations and business development roles. Most recently, at BP p.l.c., she served as group vice president of marketing from 2000 to 2003, and group vice president of emerging markets from 1999 to 2000. She has held senior executive positions in Asia, Europe and the United States, including president of Amoco Orient Oil Company in China, and senior vice president of Retail Operations for Amoco in the United States. Ms. Catalano currently serves on the boards of directors of Willis Towers Watson, where she also serves on the nominating and governance committee; Chemtura Corporation, where she also serves on the environmental, health and safety committee and the compensation committee; and Kraton Performance Polymers, where she also serves on the compensation committee. Ms. Catalano also serves on the National Board of Directors of the Alzheimer's Association and the board of directors of the Houston Grand Opera. She is a senior fellow and advisory board member of the Kellogg Innovation Network at Northwestern University, an advisor to the market research firm of Edelman Berland and a member of the Advisory Board for the NACD Texas Tri-Cities Chapter. In addition to her global business experience in marketing, Ms. Catalano has outside board and advisory experience.
Celeste A. Clark, Ph.D. | Director Since 2011 | ||
Age 62 |
Dr. Clark served for almost 35 years at Kellogg Company, most recently as the company's senior vice president of global public policy and external relations, chief sustainability officer and a member of the global executive leadership team. Dr. Clark also served as president of the Kellogg Citizenship Fund, the company's philanthropic entity, and was a company liaison worldwide between professional organizations, academic institutions, government agencies, and industry associations on nutrition, health policy and advertising practices. Dr. Clark served as a director and member of the nominating and governance and compensation committees of Diamond Foods, Inc. until its 2016 acquisition by Snyder's-Lance, Inc. She is a director of AdvancePierre Foods, a member of the board of trustees and the audit and board development committees of the W.K. Kellogg Foundation, and she is a member of the board of directors and nominating and governance committee of AAA Michigan. Dr. Clark is an adjunct professor in Food Science and Nutrition at Michigan State University. She is the principal of Abraham Clark Consulting, LLC which specializes in leadership development, health policy and regulatory affairs. In addition to her global business experience, Dr. Clark has industry experience in various nutrition, consumer products, public policy, risk management, governance and philanthropic matters.
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James M. Cornelius | Director Since 2009 | ||
Age 72 |
Mr. Cornelius, our chairman of the board, served as the non-executive chairman of the board of directors of Bristol-Myers Squibb Company ("BMS") from May 2010 through his retirement in May 2015. Prior to serving as BMS's non-executive chairman, Mr. Cornelius served as chairman of the board and chief executive officer of BMS since September 2006, including serving as interim chief executive officer of BMS from September 2006 to April 2007. He retired as the chief executive officer of BMS in May 2010. Mr. Cornelius is a member of the board of Arcamed, Inc., an Indianapolis-based manufacturer of custom metal products, and HyGIeaCare Inc., a company specializing in gastroenterological services and solutions. He also serves on the board of YourEncore, an Indianapolis-based company providing a network of retired and veteran scientists and engineers assisting clients with proven experience to help accelerate the pace of their innovation. Among other qualifications, Mr. Cornelius has significant global business leadership experience, both as an executive officer and a director of public companies.
Stephen W. Golsby | Director Since 2009 | ||
Age 61 |
Mr. Golsby served, from September 2008 until his retirement in April 2013, as our president and chief executive officer. Prior to serving as president and chief executive officer, he was employed continuously by Mead Johnson in various capacities since October 1997. From January 2004 to September 2008, Mr. Golsby served as president of Mead Johnson. He served as president, International of Mead Johnson from 2001 until 2003 and senior vice president, Asia Pacific from 1998 to 2000. Mr. Golsby served as a director of Beam Inc. until its 2014 acquisition by Suntory Holdings Limited. Mr. Golsby is a director of RMA Group (Hong Kong) and also serves as an advisor to Thai Union Group, Thai Wah pcl and to the Thailand Board of Investment. In addition to his global business experience as the former president and chief executive officer of the Company and, previously, in various senior positions at Unilever, Mr. Golsby's extensive knowledge of and insight into the Company provides unique value to the Board.
Michael Grobstein | Director Since 2014 | ||
Age 73 |
Mr. Grobstein is a retired vice chairman of Ernst & Young LLP, an independent registered public accounting firm. Mr. Grobstein worked with Ernst & Young from 1964 to 1998, and was admitted as a partner in 1975. He served as a vice chairman-international operations from 1993 to 1998, as vice chairman-planning, marketing and industry services from 1987 to 1993, and vice chairman-accounting and auditing services from 1984 to 1987. He currently serves on the board of directors of BMS, where he serves on both the audit committee and the compensation and management development committee. He serves on the board of trustees and executive committee and is the treasurer of the Central Park Conservancy, and he is a director of the Peer Health Exchange, Inc. Mr. Grobstein has extensive knowledge and background relating to accounting and financial reporting rules and regulations as well as the evaluation of financial results, internal controls and business processes. Mr. Grobstein has significant depth and breadth of financial expertise, experience handling complex financial issues and experience serving on major international boards of directors.
Peter Kasper Jakobsen | Director Since 2012 | ||
Age 54 |
Mr. Jakobsen has been our President and Chief Executive Officer since April 2013, prior to which he served as the Company's executive vice president and chief operating officer since January 2012. Mr. Jakobsen previously had been our president, Americas from January 2009 through December 2011 and has been employed continuously by Mead Johnson since March 1998 in various capacities. From October 2006 to January 2009, he served as senior vice president, Asia Pacific. From February 2004 to October 2006, Mr. Jakobsen served as vice president, South Asia, and from June 2001 to June 2004, he served as general manager, Philippines. In addition to his extensive knowledge of and experience with the Company, Mr. Jakobsen serves as a critical link between management and the Board.
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Peter G. Ratcliffe | Director Since 2009 | ||
Age 68 |
Mr. Ratcliffe served, from April 2003 until his retirement in June 2007, as chief executive officer of the P&O Princess International division of Carnival Corporation and plc, a global cruise company. From January 2000 to April 2003, he served as chief executive officer of P&O Princess Cruises plc, a global cruise company. Mr. Ratcliffe is a director of BBA Aviation plc and Casa Pacifica Centers for Children & Families. Mr. Ratcliffe is a fellow of the Institute of Chartered Accountants in England and Wales. Among other qualifications, Mr. Ratcliffe has significant global business leadership experience, both as an executive officer and a director of public companies.
Michael A. Sherman | Director Since 2015 | ||
Age 49 |
Mr. Sherman currently serves as the Chief Operating Officer and Chief Financial Officer of Endocyte Inc. He has served as Endocyte's Chief Financial Officer since 2006, and was also appointed as the Chief Operating Officer in 2014. Prior to 2006, Mr. Sherman served in various executive roles at Guidant Corporation, including Vice President of Finance and Strategic Planning, Vice President of Finance for Europe, Middle East, Africa and Canada and Corporate Controller. Mr. Sherman serves as a director of the Children's Museum of Indianapolis. In addition to his wide-ranging financial expertise, Mr. Sherman has both significant familiarity with health-related industries and extensive experience with global commercial (particularly sales and marketing) activities and leadership of strategic transactions.
Elliott Sigal, M.D., Ph.D. | Director Since 2009 | ||
Age 64 |
Dr. Sigal is a former executive vice president and director of Bristol-Myers Squibb. Dr. Sigal joined BMS in 1997 and had roles of increasing responsibility in both research and development. He served as chief scientific officer and president of research and development for BMS from 2004 until his retirement in 2013. Dr. Sigal served on the board of BMS from 2011 until his retirement. He currently serves as a senior advisor to the healthcare team of the venture group, New Enterprise Associates and is a consultant to various biotechnology companies. In addition, Dr. Sigal serves as a director of Spark Therapeutics where he serves as a member of the compensation, nominating and corporate governance and science and technology committees. He is a director of Adaptimmune Therapeutics plc where he serves as a member of the corporate governance and nominating committee, and serves on the board of the private non-profit foundation, the Melanoma Research Alliance. In addition to his global business experience in research and development and as a chief scientific officer, Dr. Sigal has industry and research experience in global clinical and pharmaceutical development.
Robert S. Singer | Director Since 2009 | ||
Age 64 |
Mr. Singer served as chief executive officer of Barilla Holding S.p.A, a major Italian food company, from January 2006 to April 2009. From May 2004 through August 2005, Mr. Singer served as president and chief operating officer of Abercrombie & Fitch Co., an American clothing retailer. Prior to joining Abercrombie, Mr. Singer served as chief financial officer of Gucci Group NV, a leading luxury goods company, from September 1995 to April 2004. Mr. Singer serves as a director of Tiffany & Co., where he also serves as the chairman of the audit committee and a member of the compensation committee. Mr. Singer also serves as a director and chairman of the audit committee of Coty Inc. and as a director and chairman of the audit committee of Jimmy Choo PLC. Mr. Singer currently serves on the board of directors of privately held Gianni Versace SpA, Bally S.A. and Belstaff. He serves on the advisory council of John Hopkins University School of Advanced International Studies (SAIS) Bologna Center and is an advisor to CCMP Capital. Among other qualifications, Mr. Singer has significant global business leadership experience, both as an executive officer and a director of public companies.
Meetings
During 2015, the Board held 11 meetings and concluded each of its regular meetings in executive session without management present. In addition, our independent directors met separately as a group in 2015. Other than
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Messrs. Golsby and Jakobsen and Dr. Sigal, all of our current directors are independent directors, as defined by the rules of the NYSE.
During 2015, all of our directors attended 75% or more of the aggregate number of meetings of the Board and Board committees on which they served. All directors are expected to attend our annual meetings of stockholders. All 13 of our directors attended the annual meeting of stockholders in April 2015.
Board Leadership Structure
The roles of Chairman of the Board and Chief Executive Officer are held by different individuals. Mr. Cornelius serves as our non-executive Chairman while Mr. Jakobsen serves as our president and chief executive officer and as a director. As president and chief executive officer, Mr. Jakobsen is responsible for setting the strategic direction of the Company, the day-to-day leadership and performance of the Company and managing all levels of the organization. Mr. Cornelius, as non-executive Chairman, organizes Board activities that enable the Board to effectively provide guidance to, and oversight of, management. Mr. Cornelius provides Mr. Jakobsen with ongoing direction as to Board priorities, provides feedback from the Board and ensures that Board agendas are appropriately directed to the matters of greatest importance to the Company. The Board believes that separating the Chairman and Chief Executive Officer roles provides an effective balance of strong leadership and independent oversight and best meets our current circumstances.
The Company's Corporate Governance Guidelines provide that the Board may, in its discretion, select a Lead Independent Director. At this time, the Board has determined that Mr. Cornelius qualifies as an independent director and can fulfill all of the responsibilities that would otherwise be undertaken by a Lead Independent Director. As such, the Board does not have a Lead Independent Director.
Board Role in Risk Oversight
The Board is responsible for oversight of the Company's enterprise risk management ("ERM") processes designed by senior management. As more fully detailed below under the section titled "Committees of the Board of Directors," the Board's Risk Management and Compliance Committee oversees the Company's ERM process and the Company's compliance program. The Board's Audit Committee also provides specific oversight of the Company's financial risk exposures. The Board's Nutrition Science and Technology Committee provides specific oversight of the Company's research and development, quality and food safety process. The Board's Compensation and Management Development Committee provides specific oversight of potential risk associated with the Company's compensation programs.
The Company's Chief Executive Officer and/or Chief Risk and Compliance Officer informs the Board and the appropriate Board committee(s) of the Company's major risk exposures and describes the steps taken by senior management to monitor and control such exposures. Such steps include management reviewing the results of a formal risk analysis, defining responsive mitigation plans and incorporating such plans in our overall strategic plan. Senior management, with Board and committee oversight, is responsible for daily execution and management of the Company's risk management processes and sets the Company's tone at the top. In addition to anticipating and prioritizing risks based on the magnitude and probability of occurrence, senior management monitors significant risks and responses and ensures that the Company's overall business strategy is risk-responsive.
Communicating with the Board of Directors
Stockholders and other interested parties wishing to contact one or more of our directors, including the non-management directors as a group, may do so by sending a letter to the director or directors at Board of Directors, Mead Johnson Nutrition Company, 2701 Patriot Boulevard, Glenview, Illinois 60026, Attention: Corporate Secretary. Any such correspondence will be forwarded to the appropriate director or directors for review.
Governance Stockholder Outreach and Engagement
In 2015, the Nominating and Corporate Governance Committee determined to initiate a program to engage more actively with the Company's major institutional stockholders on corporate governance matters. To this end, the Committee appointed a stockholder engagement team consisting of the following company executives: (i) our
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senior vice president, general counsel and secretary, (ii) our senior vice president, global human resources and (iii) our vice president, investor relations. At the direction of the Nominating and Corporate Governance Committee, our stockholder engagement team conducted meetings with several of our largest stockholders. Discussions between our engagement team and the stockholder representatives focused on corporate governance matters, board composition, our executive compensation program, stockholder engagement and corporate social responsibility. The Board and management gave significant consideration and weight to the feedback received as part of these discussions. As part of our commitment to enhance relationships and seek feedback from our stockholders, we intend to continue this outreach program.
Director Independence
To be considered independent, the Board must affirmatively determine that a director does not have any direct or indirect material relationship with the Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with the Company). Our Corporate Governance Guidelines require that the Board be composed of a majority of directors who meet the criteria for "independence" established by rules of the NYSE.
Our Board annually undertakes a review of director independence. During its review, the Board considered transactions and relationships between each director or any member of his or her immediate family and the Company and its subsidiaries and affiliates. The Board also considered whether there were any transactions or relationships between directors or any member of their immediate family (or any entity of which a director or an immediate family member is an executive officer, general partner or significant equity holder) and members of our senior management or their affiliates. The purpose of this review was to determine whether any such relationships or transactions existed that were inconsistent with a determination that the director is independent.
As a result of this review, the Board affirmatively determined that a majority of our directors are independent as follows:
Name
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Independence Status | Factors Considered | ||
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Steven M. Altschuler, M.D. |
Independent | (1) | ||
Howard B. Bernick |
Independent | |||
Kimberly A. Casiano |
Independent | |||
Anna C. Catalano |
Independent | (2) | ||
Celeste A. Clark, Ph.D. |
Independent | |||
James M. Cornelius |
Independent | |||
Stephen W. Golsby |
Not Independent | (3) | ||
Michael Grobstein |
Independent | (4) | ||
Peter Kasper Jakobsen |
Not Independent | (3) | ||
Peter G. Ratcliffe |
Independent | |||
Michael A. Sherman |
Independent | |||
Elliott Sigal, M.D., Ph.D. |
Not Independent | (5) | ||
Robert S. Singer |
Independent |
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Committees of the Board of Directors
The standing committees of the Board are the Audit Committee, the Compensation and Management Development Committee, the Nominating and Corporate Governance Committee, the Nutrition Science and Technology Committee and the Risk Management and Compliance Committee. The members of each committee are appointed by the Board and serve until their successors are elected and qualified, unless they are earlier removed or resign.
The Board has determined that all members of the Audit Committee, the Compensation and Management Development Committee and the Nominating and Corporate Governance Committee are independent within the meaning of applicable SEC rules and the listing standards of the NYSE applicable to members of each such committee. In the case of the Compensation and Management Development Committee, this determination included an assessment by the Board that no member of the committee has a relationship which is material to such director's ability to be independent from management in connection with the duties of a compensation committee member. Each committee is governed by a written charter that is available on our website at www.meadjohnson.com under the caption "CompanyCorporate GovernanceCommittee Charters."
The table below indicates the current composition of each committee, the audit committee members determined by the Board to be "audit committee financial experts" and the number of meetings held by each committee in 2015:
Committee | Committee Chair |
Additional
Committee Members |
Audit Committee
Financial Experts |
Number of
2015 Committee Meetings |
||||
---|---|---|---|---|---|---|---|---|
Audit Committee |
Peter G. Ratcliffe |
Kimberly A. Casiano
Michael A. Sherman Robert S. Singer(1) |
Peter G. Ratcliffe
Michael A. Sherman Robert S. Singer |
11 | ||||
Compensation and
|
|
|
|
|
||||
Nominating and Corporate
|
|
|
|
|
||||
Nutrition Science and
|
|
|
|
|
||||
Risk Management and
|
|
|
|
|
13
Audit Committee
The Audit Committee has responsibility for, among other things:
The Audit Committee Report appears on page 59 of this proxy statement. The Audit Committee has the power to investigate any matter brought to its attention within the scope of its duties and to retain counsel for this purpose where appropriate, at the Company's expense.
Compensation and Management Development Committee
The Compensation and Management Development Committee exercises the authority of the Board relating to employee benefit plans and is responsible for the oversight of compensation generally. The Compensation and Management Development Committee has responsibility for, among other things:
The Compensation and Management Development Committee Report appears on page 24 of this proxy statement. The Compensation and Management Development Committee has directly engaged Aon Hewitt as its compensation consultant after taking into consideration all factors relevant to Aon Hewitt's independence from management. The Compensation and Management Development Committee also has the authority to engage and obtain advice from outside advisors and to retain counsel where appropriate, at the Company's expense.
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee assists and advises the Board on director nominations, corporate governance and general Board organization and planning matters. The Nominating and Corporate Governance Committee has responsibility for, among other things:
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The Nominating and Corporate Governance Committee has the authority to engage and obtain advice from outside advisors and to retain counsel where appropriate, at the Company's expense.
Nomination of Directors: Pursuant to our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee is responsible for reviewing with the Board, on an annual basis, the appropriate criteria for membership to the Board. Directors are selected based on, among other things, diversity of backgrounds and experience, integrity, independence, wisdom, an inquiring mind, vision, a proven record of accomplishment and an ability to work with others. The full Board has final approval authority with respect to any candidate.
In developing criteria for open Board positions, the Nominating and Corporate Governance Committee takes into account such factors as it deems appropriate, which may include: the current Board composition; the range of talents, experiences and skills that would best complement those already represented on the Board; and the need for financial or other specialized expertise. Applying these criteria, the Nominating and Corporate Governance Committee considers candidates for Board membership that may be suggested by its members and other Board members, as well as by management and stockholders. The Nominating and Corporate Governance Committee also may retain a third-party executive search firm to assist it with identifying and reviewing candidates.
Based primarily on the need for additional Board members, the Nominating and Corporate Governance Committee will identify a prospective nominee and make an initial determination as to whether to conduct a full evaluation of the nominee. In making this determination, the Nominating and Corporate Governance Committee considers the information provided to it with the candidate's recommendation, as well as information that is publicly available or obtained through inquiries to third parties. If the Nominating and Corporate Governance Committee determines, in consultation with the Chairman of the Board and other directors, as appropriate, that additional consideration is warranted, it may request a third-party executive search firm to gather additional information about the prospective nominee's background and experience and to report its findings to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee then evaluates the prospective nominee against the specific criteria that it has established for the position, which may include:
15
If the Nominating and Corporate Governance Committee decides, on the basis of its preliminary review, to proceed with further consideration, members of the Nominating and Corporate Governance Committee, as well as other members of the Board, as appropriate, interview the nominee. After completing this evaluation and interview, the Nominating and Corporate Governance Committee makes a recommendation to the full Board, which makes the final determination whether to nominate or appoint the new director after considering the Nominating and Corporate Governance Committee's report.
A stockholder who wishes to recommend a prospective nominee for the Board should notify our Corporate Secretary in writing with whatever supporting material the stockholder considers appropriate. Any prospective nominee recommended by a stockholder will be considered and evaluated on the same basis as other prospective nominees. The Nominating and Corporate Governance Committee will also consider whether to nominate any person nominated by a stockholder pursuant to the provisions of our bylaws relating to stockholder nominations as described in "General Information" above on pages 5-6.
Nutrition Science and Technology Committee
The Nutrition Science and Technology Committee assists the Board in its oversight of the Company's research and development ("R&D") activities, medical and scientific risk management processes and management of food quality and food safety risks, as well as interacting with and evaluating the performance of the Company's internal R&D function. The Nutrition Science and Technology Committee has responsibility for, among other things:
The Nutrition Science and Technology Committee has the authority to engage and obtain advice from outside advisors and to retain counsel where appropriate, at the Company's expense.
Risk Management and Compliance Committee
The Risk Management and Compliance Committee assists the Board in its oversight of the Company's risk management and compliance programs and reviews the effectiveness of management's processes for (a) identifying, assessing, mitigating and monitoring enterprise-wide risks and (b) implementation and administration of the Company's ethical policies and programs, including the Standards of Business Conduct and Ethics. The Risk Management and Compliance Committee has responsibility for, among other things:
16
The Risk Management and Compliance Committee has the authority to engage and obtain advice from outside advisors and to retain counsel where appropriate, at the Company's expense.
Succession Planning and Management Development
The Board supports the development of executive talent at the Company, especially the senior leaders of the Company and the Chief Executive Officer. Continuity of strong leadership at all levels of the Company is part of the Board's mandate for delivering strong performance to stockholders. Toward that goal, the executive talent development and succession planning process is integrated in the Board's annual activities. Our Corporate Governance Guidelines require that our Chief Executive Officer annually report to the Board on succession planning (including plans in the event of an emergency) and management development. The Corporate Governance Guidelines also require that the Chief Executive Officer provide the Board with an assessment of persons considered potential successors to certain senior management positions at least once each year. The Board deliberates in executive session on the succession plan for the Chief Executive Officer, including an ongoing evaluation of potential succession candidates.
Management and the Board take succession planning very seriously and while the Corporate Governance Guidelines require an annual review, the process for management development and succession planning occurs more frequently and involves regular interaction between management and the Board. Management regularly identifies high potential executives for additional responsibilities, new positions, promotions or similar assignments to expose them to diverse operations within the Company, with the goal of developing well-rounded, experienced, and discerning senior leaders. Identified individuals are often positioned to interact more frequently with the Board so that directors may gain familiarity with these executives.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines that delineate its operation and that of its committees. From time to time, our Board may revise the Corporate Governance Guidelines in response to changing regulatory requirements, evolving corporate governance best practices and the concerns of our stockholders and other constituents. A copy of the Corporate Governance Guidelines is available on our website at www.meadjohnson.com under the caption "CompanyCorporate GovernanceGuidelinesCorporate Governance Guidelines." The Corporate Governance Guidelines address, among other matters, the Board's composition and structure, the Board's responsibilities, the Board's retirement policy, the Board's meeting procedures, the Board's involvement with senior management, the Board's role in leadership development and general committee matters.
We have established Standards of Business Conduct and Ethics (the "SBCE"), a Code of Ethics for Senior Financial Officers, and a Code of Conduct and Ethics for Directors (collectively, the "Codes"). These Codes establish the standards of ethical conduct applicable to all of our directors, officers, employees, consultants and contractors, and communicate our commitment to the highest standards of ethical behavior in all of our business activities as well as compliance with all applicable laws and regulations.
The SBCE addresses, among other things, competing fairly in the global marketplace, compliance with anti-bribery and other laws, conflicts of interest, keeping accurate records, protecting company assets, confidentiality, and corporate opportunity requirements and the process for reporting violations of the SBCE, employee misconduct, conflicts of interest or other violations of company policies and procedures. The Code of Ethics for Senior Financial Officers applies to the Company's chief executive officer, chief financial officer, the
17
financial and operations controllers, the treasurer, the head of internal audit and heads of major business units and others performing similar functions and supplements the SBCE. The Code of Conduct and Ethics for Directors applies to the Company's non-employee directors.
The Codes are publicly available on our website at www.meadjohnson.com, under the caption "CompanyCorporate GovernanceConduct." The Company will furnish a copy of the Codes to any person, without charge, upon written request directed to the Corporate Secretary at our principal executive offices at 2701 Patriot Boulevard, Glenview, Illinois 60026. Any amendment or waiver to the Codes with respect to our chief executive officer, chief financial officer, controller or persons performing similar functions will be disclosed as required by applicable law and will be posted promptly on our website.
We have adopted a director compensation program that establishes annual compensation for our non-employee directors that will enable us to attract and retain high quality directors, provide them with compensation at a level that is consistent with our compensation objectives and encourage their ownership of our common stock to further align their interests with those of our stockholders. Our non-employee director compensation program includes cash compensation and equity grants in the form of restricted stock units ("RSUs") as described below. We use the same peer group for director compensation comparisons as for executive compensation comparisons, have a comparable compensation strategy and review our program annually with the assistance of Aon Hewitt.
Cash Compensation
Non-Employee Directors (Other Than Our Non-Executive Chairman): In 2015, our non-employee director compensation program provided the following cash compensation for all non-employee directors (other than our non-executive Chairman):
Committee Name
|
Chair
Retainer |
Non-Chair Committee
Member Retainer |
|||||
---|---|---|---|---|---|---|---|
Audit |
$ | 25,000 | $ | 10,000 | |||
Compensation and Management Development |
$ | 20,000 | $ | 7,500 | |||
Nominating and Corporate Governance |
$ | 15,000 | $ | 6,500 | |||
Nutrition Science and Technology |
$ | 15,000 | $ | 6,500 | |||
Risk Management and Compliance |
$ | 20,000 | $ | 7,500 |
Non-Executive Chairman: In 2015, our non-executive Chairman was entitled to an annual cash retainer of $190,000 in lieu of the cash compensation payable to non-employee directors detailed above.
Restricted Stock Units
Non-Employee Directors (Other Than Our Non-Executive Chairman): In 2015, each non-employee director (other than our non-executive Chairman) was entitled to an annual equity grant in the form of RSUs having a grant date fair market value of $175,000. Generally, these RSU grants are made concurrently with annual equity grants to our employees; however, unlike employee equity grants, the directors' RSU grants vest in full on the first anniversary of the grant date.
Non-Executive Chairman: In 2015, in lieu of the RSU grant made to non-employee directors, our non-executive Chairman was entitled to an annual grant of RSUs having a grant date fair value of $360,000, which vests in full on the first anniversary of the grant date.
18
Modifications to Director Compensation Program for 2016
In December 2015, the Nominating and Corporate Governance Committee engaged in its periodic review of non-employee director compensation. As a result of this review and consistent with the compensation reductions for management and cost savings initiatives undertaken by the Company under our productivity program referred to as "Fuel for Growth," the following changes were made to non-employee director compensation for the 2016 fiscal year: The annual cash retainer paid to each non-employee director (other than our non-executive Chairman) will be reduced from $100,000 to $50,000. The annual cash retainer paid to our non-executive Chairman will be reduced from $190,000 to $90,000.
2015 Director Compensation
The following table provides information on 2015 compensation for non-employee directors who served on the Board during 2015.
Name
|
Fees Earned or
Paid in Cash ($)(1) |
Stock
Awards ($)(2) |
Total ($) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Steven M. Altschuler, M.D. |
$ | 125,178 | $ | 175,099 | $ | 300,277 | ||||
Howard B. Bernick |
$ | 121,250 | $ | 175,099 | $ | 296,349 | ||||
Kimberly A. Casiano |
$ | 116,500 | $ | 175,099 | $ | 291,599 | ||||
Anna C. Catalano |
$ | 122,500 | $ | 175,099 | $ | 297,599 | ||||
Celeste A. Clark, Ph.D. |
$ | 114,000 | $ | 175,099 | $ | 289,099 | ||||
James M. Cornelius |
$ | 190,000 | $ | 360,008 | $ | 550,008 | ||||
Stephen W. Golsby |
$ | 106,500 | $ | 175,099 | $ | 281,599 | ||||
Michael Grobstein |
$ | 120,000 | $ | 175,099 | $ | 295,099 | ||||
Peter G. Ratcliffe |
$ | 126,542 | $ | 175,099 | $ | 301,641 | ||||
Michael A. Sherman |
$ | 111,046 | $ | 175,099 | $ | 286,145 | ||||
Elliott Sigal, M.D., Ph.D. |
$ | 119,690 | $ | 175,099 | $ | 294,789 | ||||
Robert S. Singer |
$ | 125,000 | $ | 175,099 | $ | 300,099 |
Name
|
RSUs | |||
---|---|---|---|---|
Steven M. Altschuler, M.D. |
1,678 | |||
Howard B. Bernick |
1,678 | |||
Kimberly A. Casiano |
1,678 | |||
Anna C. Catalano |
1,678 | |||
Celeste A. Clark, Ph.D. |
1,678 | |||
James M. Cornelius |
3,450 | |||
Stephen W. Golsby |
1,678 | |||
Michael Grobstein |
1,678 | |||
Peter G. Ratcliffe |
1,678 | |||
Michael A. Sherman |
1,678 | |||
Elliott Sigal, M.D., Ph.D. |
1,678 | |||
Robert S. Singer |
1,678 |
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Director Stock Ownership Guidelines
Our non-employee directors are subject to ownership guidelines regarding shares of our common stock. Our guidelines require that, within four years of becoming a director, each of our non-employee directors hold common stock with a value equal to four times his or her annual cash retainer. In measuring stock ownership for our directors, actual common stock owned and unvested time-based RSUs are counted toward the ownership requirements. Directors may acquire common stock through the retention of the annual stock awards as well as any other acquisition of common stock. Our non-employee directors may not sell any of their common stock awards until the director has achieved the ownership threshold (except to satisfy tax withholding requirements). If a director holds the retention amount, such director may elect to sell any shares above that amount upon vesting. When one of our non-employee directors departs from the Board, the director must retain common stock with a value equal to four times his or her annual cash retainer for a six-month period following the director's date of departure. All of our current directors have met our stock retention requirements, or are on track to meet our stock retention requirements, within the required time frame.
Policy Prohibiting Speculative Transactions
Our securities trading policy prohibits our directors, officers and employees from engaging in any transaction in which they may profit from short-term speculative swings in the value of our securities. Accordingly, our directors, officers and employees are not permitted to engage in transactions involving "short sales" or "short sales against the box," "put" and "call" options or various types of hedging transactions.
Our policy further prohibits our directors, officers and employees from holding our securities in margin accounts or pledging our securities as collateral for loans. An exception to this prohibition may be granted by the Company's General Counsel where a director or officer wishes to pledge our securities as collateral for a loan (not including margin debt) and clearly demonstrates the financial capacity to repay the loan without resorting to the pledged securities. Except with regard to the pledge of securities described in footnote 6 to the "Security Ownership of Certain Beneficial Owners and Management" table, below, no such pledges are outstanding.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers who serve, or in the past year has served, on our Board or Compensation and Management Development Committee.
20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 21, 2016, regarding beneficial ownership of our common stock by:
The number of shares beneficially owned by each stockholder is determined under the SEC's rules and generally includes voting or investment power over shares. Under SEC rules, shares are beneficially owned when an individual has voting and/or investment power over the shares or could obtain voting and/or investment power over the shares within 60 days. Voting power includes the power to direct the voting of the shares, and investment power includes the power to direct the disposition of the shares. Unless otherwise noted, shares listed below are owned directly or indirectly with sole voting and investment power. None of our directors or executive officers, individually or as a group, beneficially owns greater than 1% of the outstanding shares of our common stock.
Name of Beneficial Owner
|
Number of Shares of
Common Stock Beneficially Owned(1) |
Percent of Common
Stock Beneficially Owned(%) |
|||||
---|---|---|---|---|---|---|---|
5% or Greater Stockholders |
|||||||
Capital Research Global Investors(2) |
14,581,786 | 7.81 | % | ||||
BlackRock, Inc.(3) |
13,450,507 | 7.21 | % | ||||
FMR LLC(4) |
12,054,988 | 6.46 | % | ||||
The Vanguard Group(5) |
11,612,306 | 6.22 | % | ||||
Named Executive Officers and Directors: |
|||||||
Peter Kasper Jakobsen |
280,137 | (6) | |||||
Michel Cup |
6,000 | ||||||
Charles M. Urbain |
119,374 | (7) | |||||
Peter G. Leemputte |
46,517 | ||||||
Patrick M. Sheller |
5,591 | (8) | |||||
James Jeffrey Jobe |
82,326 | (9) | |||||
Graciela Monteagudo |
44,258 | (10) | |||||
Steven M. Altschuler, M.D. |
14,419 | ||||||
Howard B. Bernick |
45,000 | (11) | |||||
Kimberly A. Casiano |
7,820 | ||||||
Anna C. Catalano |
9,452 | ||||||
Celeste A. Clark, Ph.D. |
10,288 | ||||||
James M. Cornelius |
140,544 | (12) | |||||
Stephen W. Golsby |
19,795 | ||||||
Michael Grobstein |
5,824 | ||||||
Peter G. Ratcliffe |
14,723 | ||||||
Michael A. Sherman |
1,678 | ||||||
Elliott Sigal, M.D., Ph.D. |
24,298 | (13) | |||||
Robert S. Singer |
7,288 | ||||||
All directors and executive officers as a group (22 persons) |
942,796 | (14) |
21
22
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires our executive officers and directors and persons who own more than 10% of our common stock to file initial reports of ownership and changes in ownership with the SEC. Based solely on our review of the reports that have been filed by or on behalf of such persons in this regard and written representations from them that no other reports were required, we believe that all persons filed the reports required by Section 16(a) of the Exchange Act on a timely basis during or with respect to 2015.
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
The Board must approve any transactions involving the Company in which any of our directors, director nominees, executive officers, greater than five percent beneficial owners and their respective immediate family members has a direct or indirect material interest and where the amount involved in the transaction exceeds or is expected to exceed $120,000 in a single calendar year. In doing so, the Board takes into account, among other factors it deems appropriate:
FMR LLC ("Fidelity") filed an amended Schedule 13G in February 2016, indicating that it holds over 5% of the Company's common stock. As a result, Fidelity is currently considered a "related person" as outlined above. Certain affiliates of Fidelity provide services to the Company in connection with the administration of our pension plan and 401(k) plans. The Company paid such entities approximately $525,900 to administer our pension plan in fiscal year 2015 and approximately $87,970 to administer our 401(k) plans in fiscal year 2015. Services with Fidelity were negotiated at arm's length and comparable amounts are expected to be paid to Fidelity in 2016.
23
Compensation and Management Development Committee Report
The Compensation and Management Development Committee has reviewed and discussed with management the disclosures contained in the section entitled "Compensation Discussion and Analysis" of this Proxy Statement. Based upon this review and discussion, the Compensation and Management Development Committee recommended to the Board that the section entitled "Compensation Discussion and Analysis" be included in this Proxy Statement and incorporated by reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
Members of the Compensation and Management
Development Committee, |
||||
|
|
|
|
Steven M. Altschuler, Chairman Howard B. Bernick Anna C. Catalano Robert S. Singer |
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis ("CD&A") describes our executive compensation program design and how our program operated in 2015 with respect to our principal executive officer, our principal financial officer(s) and our three other most highly compensated executive officers (collectively our "Named Executive Officers"). The CD&A first describes our executive compensation philosophy and then details the process by which our Compensation and Management Development Committee (the "CMDC") established compensation for our Named Executive Officers for 2015. We discuss performance during 2015, as well as the principal components of each Named Executive Officer's respective 2015 compensation and other benefits. Finally, we describe several of our key corporate governance policies covering executive compensation. For 2015, our Named Executive Officers were:
24
Executive Compensation Philosophy
We base our executive compensation philosophy on three core elements: (1) pay for performance, (2) stockholder value creation and (3) competitive pay. Each of these elements is further described below.
Pay for Performance
We structure our executive compensation program to align the interests of our senior executives with the interests of our stockholders. We believe that an executive's compensation should be tied directly to helping us achieve our mission, execute our strategy and deliver value to our stockholders. We also believe that a significant amount of compensation should be variable and earned over the long-term. Therefore, a significant part of each executive's pay depends on both Company performance and individual performance measured against financial and operational objectives. We believe this approach serves to focus the efforts of our executives on the attainment of sustained growth and profitability.
As Company or individual performance fluctuates above or below targeted levels, our executives' pay will fluctuate above or below our pay objective. This compensation strategy helps ensure that the Company remains focused on annual operating excellence while simultaneously emphasizing sustainable long-term enterprise value.
Stockholder Value Creation
Our compensation plans are designed to motivate executives to increase the value we deliver to our stockholders. While managing risk, we believe that investing for the growth and profitability of our brands and business is critical to the long-term success of our Company. As such, a substantial portion of executive compensation is delivered in the form of equity awards, the value of which parallels value delivered to our stockholders.
Competitive Pay
We believe that a competitive executive compensation program is an important tool to help attract and retain talented leaders. By providing compensation that is competitive with our peer companies, we retain the talent we need and enhance our ability to recruit new talent as we continue to build and lead our business over the long term. Our executive compensation program is designed to pay executives equitably relative to one another based on the work they do, the capabilities and experience they possess and the performance they demonstrate. In addition, our executive compensation program is designed to promote a nondiscriminatory work environment that enables us to leverage the diversity of thought that comes with a diverse global workforce, to motivate executives to deliver high performance with integrity, and to continue to focus on good corporate governance by implementing compensation best practices and corporate policies.
25
Compensation Practices
Below we summarize both executive compensation practices that we have implemented to drive performance and executive compensation practices that we avoid because we do not believe they serve the long-term interests of our stockholders.
2015 Stockholder Advisory Vote on Executive Compensation
The CMDC reviewed the results of the 2015 stockholder advisory vote on our executive compensation and believes that having 93.8% of the votes cast for approval of our executive compensation confirms that the actions and policy decisions reflected in last year's proxy statement were appropriate. After considering this approval, the CMDC concluded that no additional actions should be taken beyond those that were part of the normal recurring activity described in this CD&A.
Executive Compensation Program Design
Role of the CMDC
The CMDC is responsible for reviewing the executive compensation strategy and philosophy for our organization. The CMDC reviews and approves individual compensation packages for our most senior executives. The CMDC reviewed and approved both the Named Executive Officers' 2015 annual incentive award corporate performance goals and payouts (as described under "Annual Incentive Awards," below) as well as their 2015 long-term incentive award goals and payouts (as described under "Long-Term Incentive Awards," below). In the case of compensation for individuals below our most senior executives, the CMDC delegated authority to members of management to make determinations in accordance with guidelines established by the CMDC.
Interaction between the CMDC and Our Executive Officers
Our Chief Executive Officer and Chief Financial Officer recommend to the CMDC the performance targets to be used for our annual and long-term incentive awards, subject to CMDC review and approval. In addition, the senior executive officer responsible for human resources works with the CMDC, its independent compensation consultant and senior management to: (i) provide the CMDC with the appropriate information to make its decisions; (ii) propose recommendations for CMDC consideration and action; and (iii) communicate CMDC decisions to senior management for implementation. When determining compensation for the Named Executive Officers (other than the Chief Executive Officer), the CMDC considered individual performance as assessed by the Chief Executive Officer. The performance of the Chief Executive Officer was assessed directly by the Board in executive session with no members of management present.
Role of the Independent Compensation Consultant
The CMDC retains Aon Hewitt as its independent compensation consultant, reporting directly to the CMDC. See "Compensation Governance and OversightIndependent Compensation Consultant," below, for a discussion of Aon Hewitt's independence. The CMDC instructs Aon Hewitt to give it advice, independent of management, and to provide such advice for the benefit of the Company and its stockholders. In 2015, Aon Hewitt specifically assisted the CMDC by:
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Competitive Benchmarking
For 2015, our executive compensation program sought to provide target total compensation between the 50th and 75th percentile (i.e. the "leading median") of a designated peer group of multinational companies when targeted levels of performance were achieved. We believe it is critical to pay executives at a competitive level relative to our peer group in order to attract and retain the talent we need to deliver high performance. We review competitive pay levels to maintain our executive compensation program guidelines on an annual basis (i.e. our salary structure, our annual target bonus levels and our long-term incentive award guidelines). We also use competitive size-adjusted pay levels to help determine individual pay decisions.
Based on Aon Hewitt's analysis and recommendation, the CMDC used the following peer group of companies for competitive benchmarking of our 2015 executive compensation program:
Boston Scientific Corporation |
Hanesbrands Inc. | Keurig Green Mountain, Inc. | ||
Campbell Soup Company |
Hasbro Inc. |
Mattel Inc. |
||
Church & Dwight Co., Inc. |
Herbalife Ltd. |
McCormick & Company, Incorporated |
||
The Clorox Company |
The Hershey Company |
Molson Coors Brewing Company |
||
Colgate-Palmolive Company |
Ingredion Incorporated |
Perrigo Company plc |
||
Energizer Holdings, Inc.
|
International Flavors & Fragrances Inc. |
The Sherwin-Williams Company |
||
The Estée Lauder Companies Inc. |
The J.M. Smucker Company |
TreeHouse Foods, Inc. |
||
Hain Celestial Group Inc. |
Kellogg Company |
Tupperware Brands Corporation |
We believe this peer group of 24 companies was appropriate given the nature of the consumer products industry. The companies were chosen for a variety of reasons, including: comparability in size in terms of revenue and market capitalization; global business footprint; and strategic characteristics specific to the food and beverage and consumer products industries. We also considered whether a peer group company competed directly with us for executive talent. We annually review the composition of our peer group and make changes when appropriate. As a result of the 2015 analysis, we removed both Allergan, Inc. (following its 2015 acquisition) and Hillshire Brands Company (following its 2014 acquisition). These companies were replaced with Boston Scientific Corporation and Keurig Green Mountain, Inc., each of which reflects the criteria stated above.
27
Principal Components of Our 2015 Executive Compensation Program
There are three principal components to our executive compensation program: base salary, annual incentive awards and long-term incentive awards. The following charts show our target mix of these three compensation components for (i) our CEO and (ii) our other Named Executive Officers, on an aggregate basis:
CEO Target Compensation | All Other Named Executive Officers | |
|
|
|
We believe that our target mix supports our executive compensation philosophy by emphasizing incentive compensation to ensure that a sufficient portion of annual payouts remain "at risk" and tied to performance goals. Our CEO has a higher percentage of "at risk" compensation than our other named executive officers because the CMDC believes that the CEO, the individual with the greatest overall responsibility for Company performance and most direct impact on overall corporate results, should have both a larger incentive opportunity and a correlating higher percentage of total compensation "at risk."
Determining the Individual Compensation of Named Executive Officers for 2015
All elements of executive compensation are reviewed both separately and in the aggregate to ensure that the amount and types of compensation are appropriately competitive and that the program design encourages the creation of long-term stockholder value. The CMDC sets individual compensation levels after considering (1) Company performance measured against annual corporate performance goals and (2) individual performance, unique qualifications and experience. As the Company entered a period of slower growth rates than we have experienced in the past years, the CMDC also considered whether base pay and incentive awards provide sufficient retention incentives for individual executives.
28
2015 Corporate Performance Goals
In establishing annual corporate performance goals, the CMDC strives to ensure that targets are sufficiently ambitious to create maximum stockholder value, while also offering an opportunity to provide meaningful payouts to our executives. In 2015, the CMDC used the following measures with relative weightings to determine the level of achievement of various awards.
Performance
Measure |
Definition |
Rationale/Linkage to
Stockholder Value |
Weighting |
2015
Target |
|||||
---|---|---|---|---|---|---|---|---|---|
2015 Net Sales Goal |
Company performance measured against targeted net sales in constant currency, excluding the impact of specified items* | Sales growth is a key driver of value creation | 40 | % | $4,547 million | ||||
| | | | | | | | | |
2015 EBIT Goal |
Company performance measured against targeted earnings before interest and taxes (EBIT), excluding the impact of specified items* |
The EBIT goal ensures that operating performance and cost management are given significant attention in incentive compensation (versus EPS alone) |
25 |
% |
$1,115 million |
||||
| | | | | | | | | |
2015 EPS Goal |
Company performance measured against targeted diluted earnings per share, as adjusted for specified items* |
EPS is the broadest measure that captures key factor driving profitability: operating performance, capital structure (debt) and taxes |
25 |
% |
$3.96 |
||||
| | | | | | | | | |
2015 Working Capital Goal |
Company performance measured against targeted working capital (inventories, trade accounts receivable, and accounts payable) expressed as a percentage of net sales in constant currency, excluding the impact of specified items* |
The Working Capital goal focuses the organization on all drivers of cash flow |
10 |
% |
9.5% |
||||
| | | | | | | | | |
Individual Performance
All of our employees, including our Named Executive Officers, participate in the Company's performance management process. The performance management process measures individual performance over the course of the previous year against pre-set performance / achievement metrics. Individual performance factors and other achievements are taken into account by the CMDC when determining annual incentive payments and long-term incentive award levels for each Named Executive Officer.
Set forth below is a description of the specific pay decisions that were made in 2015 with respect to our Named Executive Officers.
Base Salaries
Base salaries for our Named Executive Officers are reviewed annually. Base salaries are targeted at the 50th percentile of our compensation peer group as an initial benchmark. Specific salary levels are based on factors such as individual performance, unique qualifications and experience. When awarded, salary increases are based on individual performance, individual salary position relative to market data, and our overall salary increase budget in a given year. Management reviews results of surveys that forecast what other companies' salary increase budgets will be and sets the annual salary increase budgets based upon such forecasts, along with consideration of business performance and economic conditions. In addition, salary adjustments may be granted based on significant job changes, sustained performance in a role and/or the determination that an executive's base salary is below the benchmark based on the peer group analysis.
Based on these considerations, the 2015 base salaries for Messrs. Jakobsen and Leemputte were not adjusted above prior year levels. Base salary for Mr. Urbain was adjusted as of March 2015 with his annual salary review process, and again in September 2015 in connection with his promotion to Chief Operating Officer. Base salary for Mr. Jobe was adjusted as of March 2015 with his annual salary review process. Base salary for Ms. Monteagudo was adjusted as of March 2015 in connection with her annual salary review process, and again in
29
June 2015 in recognition of her promotion to Senior Vice President and President, Americas and Global Marketing. The base salaries for the Named Executive Officers for 2015 were as follows:
Name
|
December 31, 2014
Base Salary |
2015 Percentage Increase in
Base Salary |
December 31, 2015
Base Salary |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
$ | 1,000,000 | | $ | 1,000,000 | |||||
Michel Cup |
n/a | n/a | $ | 700,000 | ||||||
Charles M. Urbain |
$ | 551,000 | 8.89 | % | $ | 600,000 | ||||
Peter G. Leemputte |
$ | 607,000 | | n/a | ||||||
Patrick M. Sheller |
n/a | n/a | $ | 500,000 | ||||||
James Jeffrey Jobe |
$ | 450,000 | 3.33 | % | $ | 465,000 | ||||
Graciela Monteagudo |
$ | 450,000 | 13.33 | % | $ | 510,000 |
Annual Incentive Awards
Our annual incentive awards are cash awards designed to reward executives for achieving corporate goals, regional market goals (as applicable) and individual performance goals. Annual incentive awards are made to our executives under the Senior Executive Performance Incentive Plan (the "Executive Performance Incentive Plan") and are targeted at the median of the compensation peer group. Each executive's target annual incentive award is a percentage of the executive's base salary as determined by job level and benchmarking data.
For 2015, each Named Executive Officer's annual incentive award was subject, in part, to the 2015 Corporate Performance Goals described on page 29. For Messrs. Jakobsen, Cup, Urbain, Leemputte, Sheller and Jobe, the corporate portion of the 2015 incentive awards based on corporate and / or market goals was weighted 100% on these 2015 Corporate Performance Goals. For Ms. Monteagudo, the portion of the 2015 incentive awards based on corporate and / or market goals was weighted 40% on the 2015 Corporate Performance Goals and 60% on goals and objectives related to the performance of the Company's North America region.
The 2015 Corporate Performance Goals and comparative Company performance with respect to each such performance goal were as follows:
Corporate Performance Goals
|
Weighting | Target | Actual | Achievement | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2015 Net Sales Goal |
40 | % | $ | 4,547 million | $ | 4,071 million | 89.5 | % | |||||
2015 EBIT Goal |
25 | % | $ | 1,115 million | $ | 981 million | 88.0 | % | |||||
2015 EPS Goal |
25 | % | $3.96 | $3.44 | 86.9 | % | |||||||
2015 Working Capital Goal |
10 | % | 9.5 | % | 9.2 | % | 103.3 | % | |||||
| | | | | | | | | | | | | |
Total |
100 | % |
As in previous years, the CMDC applied a threshold for payout under the corporate performance goal portion of the plan of 40% of the weighted average performance across the four goals shown above. Due to the fact that the Company's performance against the four goals was below threshold on a weighted average basis, the payout threshold under this portion of the plan was not met.
Separately, the CMDC considered a number of factors in evaluating individual performance, including specific individual achievements, execution of objectives under the Company's Fuel for Growth program which was publicly announced in July 2015 and the Company's actual performance against corporate goals. The specific activities considered by the CMDC were: (1) for Mr. Jakobsen, his response to a revised near term business performance outlook and his subsequent development, communication and execution of a shareholder value creation strategy, including funding key Company growth projects via reductions in operating expenses, productivity improvements and enhancements made to the Company's capital structure; (2) for Mr. Cup, his leadership of the Company's accelerated share repurchase program and related financing transactions; and (3) for Messrs. Urbain, Sheller and Jobe, their critical roles in the execution of the Fuel for Growth program and financing transactions alongside the strong leadership of their respective functional organizations. After considering these factors, the CMDC approved individual performance incentive awards under the plan for Messrs. Jakobsen, Cup, Urbain, Sheller and Jobe at ranges substantially below their respective target award levels. The portion of Ms. Monteagudo's incentive award that was based on the 2015 Corporate Performance Goals yielded no payout; however, the CMDC approved an award at slightly above target with regard to the portion of Ms. Monteagudo's incentive award that was based on regional performance. These payout amounts are reported in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table below.
30
Long-Term Incentive Awards
Long-term incentive awards are made to our executives under our stockholder-approved Long Term Incentive Plan (f/k/a the 2009 Senior Executive Performance Incentive Plan) (the "LTIP"). Our 2015 long-term incentive awards are equity-based awards designed to tie executive interests to the interests of stockholders. The ultimate value of long-term incentive awards is determined by stock price, which provides a direct link to the creation of stockholder value. In addition, our long-term incentive award program is designed to reward individual performance, as the amount of long-term incentive awards granted can vary based on the CMDC's assessments of individual performance and future potential. We use three long-term incentive award vehicles, each of which serves a different purpose.
We typically make grants of long-term incentive awards in late February or early March of each year, following the release of the prior year's financial results. We believe that consistent timing of equity award grants reflects good corporate governance that reduces the risk in selecting a grant date with a preferential stock price. For additional details regarding our policy for granting long-term incentive awards, see "Compensation Governance and OversightEquity Grant Practices."
The following chart shows the 2015 mix of the long-term incentive awards for each of the Named Executive Officers:
Mix of Long-Term Incentive Awards
We believe that the mix of long-term incentive awards shown above provides an appropriate balance between linking the compensation of our executives directly to the creation of growth in stockholder value and enhancing the retention aspect of our executive compensation program.
The target number of performance shares, stock options, and restricted stock units granted to each executive is determined based on a review of competitive market data, a subjective assessment of individual performance and future performance expectations. For 2015, the long-term incentive target values for our Named Executive Officers generally reflected the 75th percentile of our peer group for this pay component. These target values are reviewed and approved annually. Once the target value of the annual long-term incentive award is determined, the number of performance shares, stock options and restricted stock units is calculated based on the mix of long-term incentive awards approved by the CMDC (illustrated above) and the closing stock price on the date of grant.
Annual Performance Share Awards
In 2015, 40% of each Named Executive Officer's and other senior executives' annual long-term incentive awards were granted in the form of performance share awards. Each executive's performance share award is denominated as a target number of performance shares (the "Executive's Target Shares") for a three-year
31
performance cycle (a "Performance Cycle"). Each Performance Cycle is comprised of three discrete annual performance periods (each, a "Performance Period"). One-third of an Executive's Target Shares is targeted to be earned during each Performance Period in the Performance Cycle.
Corporate financial goals applicable to a Performance Period must be achieved if the executive is to earn the portion of the Executive's Target Shares applicable to that Performance Period. Unlike the annual incentive awards, payment of the performance shares is not subject to an individual performance component. After the completion of each Performance Period, the CMDC certifies the corporate financial performance results and calculates the number of shares earned by each executive with regard to such Performance Period. At approximately the same time, the CMDC establishes new corporate financial goals for the next Performance Period in the Performance Cycle. Share amounts that are earned for a completed Performance Period are fixed for the remaining duration of the Performance Cycle but are not distributed until the end of the Performance Cycle, at which time all of the shares earned by an executive for the Performance Cycle vest and are paid out to the executive.
The financial goals applicable to the 2015 Performance Period are identical to the 2015 Corporate Performance Goals. However, any three-year Performance Cycle that includes the 2015 Performance Period (i.e. the 2013 - 2015 Performance Cycle, the 2014 - 2016 Performance Cycle and the 2015 - 2017 Performance Cycle) recognizes three distinct years of performance factors to create a unique, multi-year performance target. Because the ultimate payout applicable to any three-year Performance Cycle is determined by a composite of distinct annual Performance Periods, the CMDC believes that three-year Performance Cycles reflect long term performance results.
Performance Results Under Our Outstanding Performance Share Awards
The following table illustrates our performance share awards for each of the 2013-2015, 2014-2016 and 2015-2017 Performance Cycles. The 2013 and 2014 Performance Periods were previously completed and awards for these periods are fixed.
For the 2013 performance period, 25% of the target award was based on our performance against target earnings before interest, taxes, depreciation and amortization, excluding the impact of specified items (the "2013 EBITDA Goal"). The change from EBITDA to EBIT as a performance measure in 2014 was made to facilitate the uniform application of corporate performance goals to the respective geographic markets, where EBIT is our primary measure of operating performance.
2013 - 2015 Performance Share Award Results
As noted above, each long-term Performance Cycle is comprised of three discrete annual Performance Periods. We believe that maintaining discrete, annual Performance Periods for our performance share awards allows us to set more ambitious objectives than would be considered for a single three-year performance period. This approach allows us to focus on attainment of specific annual objectives while maintaining alignment with long-term strategic objectives. Furthermore, our use of four different performance measures for each annual Performance Period provides a multi-dimensional view of performance, often with varying levels of achievement and resulting payouts.
32
As described in the chart below, achievement against the Company's 2015 Corporate Performance Goals fell below levels that would result in a payout of performance shares for the 2015 Performance Period. As a result, no performance shares were earned for the 2015 performance period. The following displays the level of achievement for the 2013 - 2015 Performance Share Awards, representing a blend of each of the 2013, 2014 and 2015 performance periods.
Year
|
Measure | Weighting | Target | Actual | Achievement | % Payout | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2013 |
Net Sales | 40% | $ | 4,147 million | $ | 4,197 million | 101.2% | 113.5% | ||||||||
|
EBITDA | 25% | $ | 1,060 million | $ | 1,054 million | 99.4% | 98.0% | ||||||||
|
EPS | 25% | $3.32 | $3.38 | 101.8% | 117.5% | ||||||||||
|
Working Capital | 10% | 9.5 | % | 7.4 | % | 122.1% | 200.0% | ||||||||
|
Total | 100% | Weighted Average: | 119.3% | ||||||||||||
2014 |
Net Sales |
40% |
$ |
4,377 million |
$ |
4,489 million |
102.6% |
126.1% |
||||||||
|
EBIT | 25% | $ | 1,033 million | $ | 1,027 million | 99.4% | 95.3% | ||||||||
|
EPS | 25% | $3.60 | $3.65 | 101.4% | 115.0% | ||||||||||
|
Working Capital | 10% | 9.0 | % | 8.8 | % | 102.2% | 103.0% | ||||||||
|
Total | 100% | Weighted Average: | 113.3% | ||||||||||||
2015 |
2015 Net Sales Goal |
40% |
$ |
4,547 million |
$ |
4,071 million |
89.5% |
% |
||||||||
|
2015 EBIT Goal | 25% | $ | 1,115 million | $ | 981 million | 88.0% | % | ||||||||
|
2015 EPS Goal | 25% | $3.96 | $3.44 | 86.9% | % | ||||||||||
|
2015 Working Capital Goal | 10% | 9.5 | % | 9.2 | % | 103.3% | 110.0% | ||||||||
|
Total | 100% | Weighted Average: | 11.0% |
Annual Stock Option Awards
Stock options provide for the right of an executive to purchase shares of Company stock in the future based on a fixed price established on the date of grant. As such, we believe stock options are inherently performance-based as the option has value to the executive only in the case that the stock price increases over time. If the stock price does not increase above the grant price, the executive will realize no value from the award. More details on the practices of granting stock options can be found below under "Compensation Governance and OversightEquity Grant Practices."
In 2015, 40% of each Named Executive Officer's and other senior executives' annual long-term incentive awards were granted in the form of stock options. The annual stock option awards granted in 2015 will vest 33.3% each year on the first, second and third anniversaries of the grant date.
Annual Restricted Stock Unit Awards
Restricted stock units generally provide for the right of an executive to receive shares of Company stock upon the attainment of continuous employment through the vesting schedule. If the executive does not meet the employment conditions specified in the award agreement, the executive will forfeit the award.
In 2015, 20% of each Named Executive Officer's and other senior executives' annual long-term incentive awards were granted in the form of restricted stock units. Restricted stock units are awarded not only to help support the creation of stockholder value but also to enhance the retention of our executives. Generally, annual awards granted to our Named Executive Officers vest in full on the fourth anniversary of the grant date.
33
The CMDC periodically grants additional "off-cycle" awards to key employees, including Named Executive Officers, in connection with recruitment, promotions, succession planning, significant accomplishments or achievements, or focused retention efforts.
Individual Compensation Arrangements
Generally, we have no employment contracts with our executives, unless required by local law or practice.
Mr. Sheller, our Senior Vice President, General Counsel and Secretary, commenced employment in January 2015. As part of his recruitment, the CMDC approved a 2015 compensation package for Mr. Sheller that included base salary of $500,000, an annual incentive opportunity targeted at 65% of his base salary and an annual long term incentive award valued at $800,000 to be delivered in the form of performance shares, stock options and restricted stock units. As part of his recruitment package, the CMDC also granted Mr. Sheller an award of 2,953 restricted stock units and 7,537 stock options, with grant date values of $294,148 and $158,428, respectively, and a transition cash payment of $265,000 in lieu of the annual incentive opportunity forfeited when Mr. Sheller left his prior employer.
Mr. Cup, our Executive Vice President and Chief Financial Officer, commenced employment in September 2015. As part of his recruitment, the CMDC approved a 2015 compensation package for Mr. Cup that included base salary of $700,000, an annual incentive opportunity targeted at 85% of his base salary and an annual long term incentive award valued at $1,858,000 to be delivered in the form of performance shares, stock options and restricted stock units. As part of his recruitment package, the CMDC also granted Mr. Cup an award of 9,284 restricted stock units and 23,696 stock options, with grant date values of $705,955 and $329,374, respectively, and a transition cash payment of $650,000 subject to repayment if Mr. Cup voluntarily resigns or is terminated for cause within his first 24 months of employment.
Mr. Leemputte served as our Chief Financial Officer until March 13, 2015 and separated from service with the Company effective as of May 31, 2015. The details of Mr. Leemputte's separation compensation are described under "Potential Payments Upon Termination or Change in Control" below.
Other Elements of 2015 Compensation
In addition to the components set forth above, our senior executives, including each of the Named Executive Officers, are entitled to participate in qualified and non-qualified retirement and savings plans, severance and change in control severance plans, other general employee benefits and limited perquisite opportunities.
Post-Employment Benefits
We offer certain plans that provide compensation and benefits to employees, including the Named Executive Officers, upon their retirement or if their employment is otherwise terminated. These plans are periodically reviewed by the CMDC to ensure that they are consistent with current competitive practice. The plans offered are common within our peer group and enhance our ability to attract and retain key talent.
Retirement Benefits
Qualified and Non-Qualified Retirement Plans: During 2015, certain of the Named Executive Officers participated in our defined benefit plans for U.S. employees, which provide income for employees following retirement. These plans were closed to new participants in 2009 and participants do not accrue additional service credits under the defined benefit formulas. The Retirement Income Plan is a tax-qualified plan, as defined under Internal Revenue Service ("IRS") regulations, and the Benefit Equalization PlanRetirement Plan is a non-qualified plan that provides pension benefits above those allowed under the pay limits for tax-qualified plans. The Summary Compensation Table reflects any increase in 2015 in the actuarial value of these benefits under each of these plans. Accrued benefits for participating Named Executive Officers, determined as of December 31, 2015, are provided in the Pension Benefits Table.
Qualified and Non-Qualified Savings Plans: During 2015, certain of the Named Executive Officers participated in our savings plans for U.S. employees, which allow employees to defer a portion of their base salary
34
and bonus and to receive matching contributions from us to supplement their income in retirement. The Retirement Savings Plan is a tax-qualified 401(k) plan, as defined under IRS regulations, and the Benefit Equalization PlanSavings Plan is a non-qualified deferred compensation plan that allows employees to defer a portion of their base salary and bonus and to receive matching contributions from us in excess of the contributions allowed under the Retirement Savings Plan. The savings plans are designed to allow employees to accumulate savings for retirement on a tax-advantaged basis. All of our U.S. employees are eligible to participate in the qualified plan, and employees whose pay or benefits exceeds the IRS qualified plan limits are eligible for the non-qualified plan. The Summary Compensation Table reflects our contributions to these plans during 2015. The Non-Qualified Deferred Compensation table provides more detail on the Benefits Equalization PlanSavings Plan.
Severance Benefits
Severance Plan: The Second Amended and Restated Mead Johnson & Company, LLC Senior Executive Severance Plan (the "Executive Severance Plan") provides the basis for establishing a competitive level of severance protection for certain senior executives to help us attract and retain key talent necessary to run our Company. Severance payments are based on the executive's position in the Company and may be adjusted as determined by the CMDC in certain situations. Treatment of outstanding equity awards in the event of a qualifying termination are governed by the terms of the applicable equity award agreement. Both the key terms of the Executive Severance Plan and the value of severance benefits to be paid to our Named Executive Officers under the Executive Severance Plan (assuming an effective termination date of December 31, 2015) are described below under "Potential Payments Upon Termination or Change in Control."
Change in Control Severance Plan: The Third Amended and Restated Mead Johnson & Company, LLC Executive Change in Control Severance Plan (the "Executive Change in Control Plan") enables management to evaluate and support potential transactions that might be beneficial to stockholders even though the result would be a change in control of our Company. The plan contains a "double-trigger," which means that benefits are only triggered upon a covered executive's involuntary termination of employment with us other than for cause or by the covered executive's termination of employment for good reason, in either case during the two-year period following the date of a change in control. Severance payments are based on the executive's position in the Company. Treatment of outstanding equity awards in the event of a qualifying termination upon a change in control are governed by the terms of the applicable equity award agreement. The plan does not provide excise tax gross-ups. Both the key terms of the Executive Change in Control Plan and the value of severance benefits to be paid to our Named Executive Officers under the Executive Change in Control Plan (assuming an effective termination date of December 31, 2015) are described below under "Potential Payments Upon Termination or Change in Control."
General Employee Benefits
We maintain medical and dental insurance, accidental death insurance and disability insurance for all of our employees. The Named Executive Officers are eligible to participate in the same welfare benefit plans as our other employees and are covered by the same vacation, leave of absence and similar policies.
Limited Perquisites
We maintain an expatriate program that provides certain benefits to our employees who accept expatriate assignments. Our executive officers, including the Named Executive Officers, are entitled to the same benefits under the Company's expatriate program as other Company employees. Under the Company's expatriate program, such benefits include providing gross-ups on taxable foreign assignment assistance and making tax equalization payments on behalf of (or to) expatriate employees who, as a result of their expatriate assignment, incur tax liabilities in excess of what they would have incurred had they not accepted the expatriate assignment. In 2015, Mr. Urbain incurred excess tax liabilities in the amount of $273,223 related to income earned during his prior expatriate assignment in Thailand (the "Urbain Expatriate Assignment"). Under our expatriate program, the Company paid such excess tax liabilities, as reported for Mr. Urbain, below, in the "All Other Compensation" column of the Summary Compensation Table. In future years, the Company may pay additional excess tax liabilities for Mr. Urbain under this program based on potential additional foreign tax liability on certain other income earned by Mr. Urbain during the Urbain Expatriate Assignment. The Company will, to the extent possible, claim any foreign tax credit refunds available during future years based on income earned by Mr. Urbain during the Urbain Expatriate
35
Assignment. Foreign tax credit refunds have been applied and will be applied (during future years) to offset any excess tax liabilities to the Company.
Tax Implications of Executive Compensation Program
It is our intention that amounts payable under the Executive Performance Incentive Plan, gains from stock option awards and long-term performance share awards will be fully deductible "performance-based" compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"). However, in order to maintain a market competitive executive compensation program, we reserve the right to make awards that are not treated as "performance-based" compensation under Section 162(m) of the Code and, as such, may not be fully deductible under Section 162(m). More specifically, compensation attributable to the vesting of restricted stock unit awards is not "performance-based" under Section 162(m) of the Code.
Compensation Governance and Oversight
Risk Considerations
The CMDC considers, in establishing and reviewing our compensation program, whether the program or any of its features could encourage unnecessary or excessive risk taking. The factors considered by the CMDC include:
The CMDC reviews management's assessment of the risks associated with the Company's compensation practices and policies for employees, including a consideration of the balance between risk-taking and risk-mitigating factors. The CMDC believes that the Company has mitigated unnecessary risk considering both the design of the compensation plans and the controls placed upon them because (i) payments under all of our management compensation plans are capped, (ii) the multiple performance goals relate directly to the business plan approved by the Board and (iii) there is an appropriate balance between our annual operating achievements and longer-term value creation, with a particular emphasis on longer-term value creation. Following a review of this assessment, the CMDC determined that any risks arising from the Company's compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. This evaluation is completed annually by the CMDC.
Stock Ownership and Retention Guidelines for Executive Officers
To further promote sustained stockholder return and to ensure the Company's executives remain focused on both short- and long-term objectives, the Company has established stock ownership and retention guidelines for our executive officers. Our guidelines require that our CEO hold shares of our common stock with a value of five times his base salary and that other senior executives, including each of our Named Executive Officers, hold shares of our common stock with a value of three times their base salary. Until these stock ownership retention amounts are attained, the executive should not sell any shares acquired following any option exercises or vesting of stock awards (except to satisfy tax withholding requirements).
Executive officers are required to accumulate and hold the minimum number of shares to meet their respective stock ownership level within five years of assuming their position. For purposes of this requirement,
36
"shares" include shares of our common stock that are owned by the executive officer, unvested time-based RSUs, performance shares earned for the annual performance periods of our open performance cycles, and the value of shares held in the company 401(k) savings plan. The CMDC reviews the stock ownership and retention levels of our executive officers on an annual basis, and in February 2016, determined that, all of our executive officers, including the Named Executive Officers, were found to have either satisfied these requirements or were on track to satisfy these requirements ahead of their allowed time frame.
Equity Grant Practices
The following describes our practices regarding equity grants to our employees.
Approval of Awards
Awards granted to our Chief Executive Officer, executive officers and other senior executives and employees are approved by the CMDC. The CMDC has provided a limited delegation of authority to the Chief Executive Officer and the senior executive officer responsible for human resources to make grants of equity to employees who are not executive officers at times other than the annual grant within certain limits. These grants are used primarily in the case of new hires or promotions.
Grant Effective DateAnnual Awards and All Other Awards
For regularly scheduled annual awards, the grant effective date is the date on which the CMDC meets to grant annual awards. For awards granted to current employees at any other time during the year, the grant effective date is generally the first business day of the month following the approval date, except that if the approval date falls on the first business day of a given month, the grant effective date is the approval date. For awards granted to new hires, the grant effective date is the first business day of the month following the employee's hire date, except that if the employee's hire date falls on the first business day of a given month, the grant effective date is the employee's hire date. In no case whatsoever will the grant effective date precede the approval date of a given award.
Grant Price and Fair Market Value
The stock option exercise price of all stock option awards is the fair market value of our common stock as of the date of grant, which for this purpose is the closing price of our common stock on the New York Stock Exchange on the date of grant.
Clawback Provisions
We have a policy providing for the adjustment or recovery of compensation in certain circumstances. If the Board, upon recommendation by the CMDC, determines that, as a result of a restatement of our financial statements or an act of malfeasance of office, an executive has received more compensation than would have been paid absent the action(s) or the incorrect financial statements, the Board, in its discretion, shall take such action as it deems necessary or appropriate to address the events that gave rise to the restatement or improper action and to prevent its recurrence. In certain cases, such action may include, to the extent permitted by applicable law: (i) requiring partial or full reimbursement of any bonus or other incentive compensation paid to the executive, (ii) causing the partial or full cancellation of restricted stock units or deferred stock awards and outstanding stock options, (iii) adjusting the future compensation of such executive and (iv) dismissing or taking legal action against the executive, in each case as the Board, upon recommendation by the CMDC, determines to be in our best interests and that of our stockholders.
Independent Compensation Consultant
The CMDC retains Aon Hewitt as its independent compensation consultant. Aon Hewitt reports directly to the CMDC, and the CMDC directly oversees the fees paid for these services provided by Aon Hewitt.
Aon Hewitt has developed safeguards to promote the independence of its executive compensation consulting advice. These independence policies include: (i) strong confidentiality requirements, a code of conduct
37
and a strict policy against investing in client organizations; (ii) management of multiservice client relationships by separate account executives; (iii) clearly defined engagements with compensation committees that are separate from any other services provided; (iv) formal segregation of executive compensation services into a separate business unit; (v) no incentives for cross-selling of services and no compensation rewards based on other results; (vi) no offers of more favorable terms for companies that retain Aon Hewitt for additional services; and (vii) consulting work limited to boards, compensation committees and companies, with no representation of individual executives in any capacity.
The CMDC has determined that the work of Aon Hewitt does not raise any conflict of interest and engaged Aon Hewitt without the recommendation of management. In making this assessment, the CMDC considered, among other factors, Aon Hewitt's provision of other services to the Company, the level of fees received by Aon Hewitt from the Company as a percentage of Aon Hewitt's total revenues, Aon Hewitt's policies and procedures designed to prevent conflicts of interest, and whether the individual Aon Hewitt advisers to the CMDC own any Company stock or have any business or personal relationships with members of the CMDC or our executive officers.
As Aon Hewitt is a leading, global human resources consultancy, the Company also retains Aon Hewitt both in certain ongoing roles and on an as-needed basis. In 2015, Aon Hewitt attended five meetings and received $89,756 in fees for its work done on behalf of the CMDC, $13,718 in fees for its work performed on behalf of the Nominating and Governance Committee and an additional $1,350,439 for general compensation consulting, employee benefit program and actuarial services done on behalf of the Company at the request of management. The CMDC was advised in 2015 of the work that Aon Hewitt does for the Company but did not specifically approve these other services.
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Summary Compensation Table2015, 2014 and 2013
The following table and notes present information concerning total compensation earned by each of our Named Executive Officers for service in 2015, 2014 and 2013, with the exception of Mr. Cup, Mr. Sheller and Ms. Monteagudo, whose total compensation is shown for 2015 only. Mr. Cup, Mr. Sheller and Ms. Monteagudo were first determined to be Named Executive Officers in 2015.
Name and Principal Position
|
Year |
Salary
($) |
Bonus
($) |
Stock
Awards ($)(8) |
Option
Awards ($)(8) |
Non-Equity
Incentive Plan Compensation ($)(9) |
Change in
Pension Value and Nonqualified Deferred Compensation Earnings ($)(10) |
All Other
Compensation ($)(11) |
Total
($) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
2015 | 1,000,000 | | 4,145,856 | 1,424,873 | 400,000 | 27,534 | 197,967 | 7,196,230 | |||||||||||||||||||
President and Chief Executive Officer |
2014 | 1,000,000 | | 3,445,523 | 1,291,803 | 1,035,000 | 1,403,529 | 193,303 | 8,369,158 | |||||||||||||||||||
|
2013 | 893,846 | | 2,718,663 | 966,747 | 981,000 | | 113,345 | 5,673,601 | |||||||||||||||||||
Michel Cup(1) |
2015 |
239,170 |
(2) |
650,000 |
(3) |
705,955 |
329,374 |
69,417 |
|
124,418 |
2,118,334 |
|||||||||||||||||
Executive Vice President and |
||||||||||||||||||||||||||||
Chief Financial Officer |
||||||||||||||||||||||||||||
Charles M. Urbain(4) |
2015 |
574,817 |
|
760,145 |
261,238 |
166,299 |
|
362,721 |
2,125,220 |
|||||||||||||||||||
Executive Vice President and |
2014 | 551,000 | | 758,047 | 284,201 | 480,698 | 776,508 | 327,825 | 3,178,279 | |||||||||||||||||||
Chief Operating Officer (Former Interim |
2013 | 548,038 | | 747,590 | 265,854 | 416,638 | | 606,961 | 2,585,081 | |||||||||||||||||||
Chief Financial Officer) |
||||||||||||||||||||||||||||
Peter G. Leemputte(5) |
2015 |
137,742 |
|
|
|
|
4,709 |
2,044,367 |
2,186,818 |
|||||||||||||||||||
Former Executive Vice President and |
2014 | 607,000 | | 1,033,657 | 387,546 | 464,355 | 45,243 | 112,386 | 2,650,187 | |||||||||||||||||||
Chief Financial Officer |
2013 | 603,769 | | 1,087,422 | 386,705 | 557,362 | | 97,932 | 2,733,190 | |||||||||||||||||||
Patrick M. Sheller(6) |
2015 |
486,538 |
265,000 |
(7) |
877,483 |
358,869 |
125,125 |
|
113,353 |
2,226,368 |
||||||||||||||||||
Senior Vice President, General Counsel |
||||||||||||||||||||||||||||
and Secretary |
||||||||||||||||||||||||||||
James Jeffrey Jobe |
2015 |
461,538 |
|
573,631 |
197,120 |
104,934 |
41,446 |
66,395 |
1,445,064 |
|||||||||||||||||||
Senior Vice President, |
2014 | 407,500 | | 1,080,988 | 184,731 | 315,109 | 757,551 | 85,997 | 2,831,876 | |||||||||||||||||||
Technical Operations |
2013 | 377,308 | | 543,748 | 193,352 | 298,587 | | 69,237 | 1,482,232 | |||||||||||||||||||
Graciela Monteagudo |
2015 |
488,019 |
|
573,631 |
197,120 |
319,825 |
|
86,864 |
1,665,459 |
|||||||||||||||||||
Senior Vice President and President, |
||||||||||||||||||||||||||||
Americas and Global Marketing |
39
Topic 718. The assumptions made in the valuation reflected in these columns are set forth in the following notes to the Company's Consolidated Financial Statements:
For Stock and Option Awards
Granted in Fiscal Year |
Consolidated
Financial Statements |
Included with
Form 10-K filed: |
Note | ||||||
---|---|---|---|---|---|---|---|---|---|
2015 |
December 31, 2015 | February 17, 2016 | 7 | ||||||
2014 |
December 31, 2014 | February 27, 2015 | 6 | ||||||
2013 |
December 31, 2013 | February 18, 2014 | 6 |
For performance share awards granted during 2015, the Company assumed that these awards would pay out at the targeted number of shares, and the grant date fair values set forth in the Stock Awards column for each Named Executive Officer reflects this assumption. Assuming maximum performance is achieved, the grant date value of the performance share awards would be as follows:
|
Value of Performance
Share Awards at Target |
Value of Performance
Share Awards Assuming Maximum Performance |
||||||
---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
$ | 2,734,000 | $ | 5,468,000 | ||||
Michel Cup |
$ | | $ | | ||||
Charles M. Urbain |
$ | 501,253 | $ | 1,002,506 | ||||
Peter G. Leemputte |
$ | | $ | | ||||
Patrick M. Sheller |
$ | 384,653 | $ | 769,306 | ||||
James Jeffrey Jobe |
$ | 378,288 | $ | 756,576 | ||||
Graciela Monteagudo |
$ | 378,288 | $ | 756,576 |
|
Relocation |
Group
Term Life Insurance Premiums |
Expatriate
Tax Payments |
Company
Contributions to Defined Contribution Plans(d) |
Termination
Payments |
TOTAL | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
| $ | 1,848 | | $ | 196,119 | | $ | 197,967 | |||||||||||
Michel Cup |
$ | 100,813 | (a) | $ | 216 | | $ | 23,389 | | $ | 124,418 | |||||||||
Charles M. Urbain |
| $ | 1,064 | $ | 273,223 | (c) | $ | 88,434 | | $ | 362,721 | |||||||||
Peter G. Leemputte |
| $ | 467 | | $ | 36,650 | $ | 2,007,250 | (e) | $ | 2,044,367 | |||||||||
Patrick M. Sheller |
$ | 81,817 | (b) | $ | 924 | | $ | 30,612 | | $ | 113,353 | |||||||||
James Jeffrey Jobe |
| $ | 855 | | $ | 65,540 | | $ | 66,395 | |||||||||||
Graciela Monteagudo |
| $ | 902 | | $ | 85,962 | | $ | 86,864 |
40
Grants of Plan Based Awards2015
The following table presents information regarding the incentive awards granted to the Named Executive Officers for 2015.
|
|
|
|
|
|
|
|
|
All Other
Stock Awards: Number of Shares of Stock or Units (#) |
|
|
|
||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
|
|
|
|
|
|
All Other
Option Awards: Number of Securities Underlying Options (#) |
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
Grant
Date Fair Value of Stock and Option Awards ($)(3) |
||||||||||||||||||||||||||
|
|
|
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards(1) |
Estimated Future Payouts
Under Equity Incentive Plan Awards(2) |
Exercise
or Base Price of Option Awards ($/Sh) |
|||||||||||||||||||||||||||||||
Name
|
Grant
Date |
Award Type |
Threshold
($) |
Target
($) |
Maximum
($) |
Threshold
(#) |
Target
(#) |
Maximum
(#) |
||||||||||||||||||||||||||||
Peter Kasper Jakobsen |
| Annual Incentive | 460,000 | 1,150,000 | 2,300,000 | |||||||||||||||||||||||||||||||
|
2/26/2015 | Perf. Shares | 10,824 | 27,059 | 54,118 | 2,734,000 | ||||||||||||||||||||||||||||||
|
2/26/2015 | RSUs | 13,530 | 1,411,856 | ||||||||||||||||||||||||||||||||
|
2/26/2015 | Stock Options | 69,068 | $ | 104.35 | 1,424,873 | ||||||||||||||||||||||||||||||
Michel Cup |
|
Annual Incentive |
79,333 |
198,333 |
396,666 |
|||||||||||||||||||||||||||||||
|
9/1/2015 | RSUs | 9,284 | 705,955 | ||||||||||||||||||||||||||||||||
|
9/1/2015 | Stock Options | 23,696 | $ | 76.04 | 329,374 | ||||||||||||||||||||||||||||||
Charles M. Urbain |
|
Annual Incentive |
172,778 |
431,946 |
863,892 |
|||||||||||||||||||||||||||||||
|
2/26/2015 | Perf. Shares | 1,985 | 4,961 | 9,922 | 501,253 | ||||||||||||||||||||||||||||||
|
2/26/2015 | RSUs | 2,481 | 258,892 | ||||||||||||||||||||||||||||||||
|
2/26/2015 | Stock Options | 12,663 | $ | 104.35 | 261,238 | ||||||||||||||||||||||||||||||
Peter G. Leemputte |
|
Annual Incentive |
51,595 |
128,988 |
257,976 |
|||||||||||||||||||||||||||||||
Patrick M. Sheller |
|
Annual Incentive |
130,000 |
325,000 |
650,000 |
|||||||||||||||||||||||||||||||
|
2/26/2015 | Perf. Shares | 1,523 | 3,807 | 7,614 | 384,653 | ||||||||||||||||||||||||||||||
|
2/2/2015 | RSUs | 2,953 | 294,148 | ||||||||||||||||||||||||||||||||
|
2/26/2015 | RSUs | 1,904 | 198,682 | ||||||||||||||||||||||||||||||||
|
2/2/2015 | Stock Options | 7,537 | $ | 99.61 | 158,428 | ||||||||||||||||||||||||||||||
|
2/26/2015 | Stock Options | 9,716 | $ | 104.35 | 200,441 | ||||||||||||||||||||||||||||||
James Jeffrey Jobe |
|
Annual Incentive |
119,925 |
299,813 |
599,626 |
|||||||||||||||||||||||||||||||
|
2/26/2015 | Perf. Shares | 1,498 | 3,744 | 7,488 | 378,288 | ||||||||||||||||||||||||||||||
|
2/26/2015 | RSUs | 1,872 | 195,343 | ||||||||||||||||||||||||||||||||
|
2/26/2015 | Stock Options | 9,555 | $ | 104.35 | 197,120 | ||||||||||||||||||||||||||||||
Graciela Monteagudo |
|
Annual Incentive |
126,664 |
316,659 |
633,318 |
|||||||||||||||||||||||||||||||
|
2/26/2015 | Perf. Shares | 1,498 | 3,744 | 7,488 | 378,288 | ||||||||||||||||||||||||||||||
|
2/26/2015 | RSUs | 1,872 | 195,343 | ||||||||||||||||||||||||||||||||
|
2/26/2015 | Stock Options | 9,555 | $ | 104.35 | 197,120 |
41
Description of Plan-Based Awards
Annual Incentive Awards
These non-equity incentive plan awards represent annual incentive award opportunities granted to the Named Executive Officers under the Executive Performance Incentive Plan for the 12-month period from January 1, 2015 through December 31, 2015. The target levels of awards are generally set as a percentage of base salary based on grade level and targeted at the median of our peer group. These awards are cash awards designed to reward executives for achieving corporate goals, regional market goals (as applicable) and individual performance goals. Performance targets and individual performance factors are described in the CD&A under "Annual Incentive Awards" beginning on page 30.
Performance Share Awards
The performance share awards were granted to the Named Executive Officers under the LTIP for the Company's 2015-2017 performance cycle and represent part of the normal annual long-term incentive grants. Performance shares are earned at between zero to 200% of one-third of the target award amount based on the achievement of the performance goal(s) established for each year of the performance cycle, subject to performance criteria being met and, generally, with continued employment through the end of 2017. Payment of the performance shares is not subject to an individual performance component. Dividends or dividend equivalents are not payable on the performance shares. The performance-based conditions for the first one-third of these awards determinable for 2015 were the 2015 Net Sales Goal (40%), the 2015 EBIT Goal (25%), the 2015 EPS Goal (25%), and the 2015 Working Capital Goal (10%). Upon an executive's death or retirement more than one year after the grant date, the executive or the executive's estate will retain any shares that have become fixed for annual performance periods that have been completed and will be entitled to a proportionate number of shares that would otherwise have been accrued for the year in which their employment ended (based on actual performance). If an executive's employment is terminated for "cause" or an executive voluntarily resigns prior to the date on which the performance share awards are settled, all such performance share awards will be forfeited. If an executive's employment is terminated "without cause" or "for good reason" prior to a change in control, the executive will retain any shares that have become fixed for annual performance periods that have been completed and will be entitled to a proportionate number of the shares that would otherwise have been accrued for the year in which employment terminates (based on actual performance). If an executive's employment is terminated "without cause" or "for good reason" during the two years following a change in control, the executive is entitled to receive the actual performance share payout for any full performance year completed prior to the termination date and the target performance share payout for the year of termination and any years not yet commenced.
Restricted Stock Units ("RSUs")
The RSUs were granted to the Named Executive Officers under the LTIP, and represent part of the normal annual long-term incentive grants and any off-cycle grants. The RSUs earn dividend equivalents in accordance with the terms of the applicable agreement. Generally, the awards granted as part of the annual long-term incentives vest in full on the fourth anniversary of the grant date. The off-cycle recruitment grant of RSUs for Mr. Sheller vests ratably on each of the first, second, third and fourth anniversaries of the grant date. The off-cycle recruitment grant of RSUs for Mr. Cup vests in full on the fourth anniversary of the date of grant.
An executive's right to the RSUs is generally subject to continued employment by the Company and an agreement to not compete, solicit or engage in any activity that is harmful to the interests of the Company. Upon an executive's death or retirement at least one year after the grant date, the executive or the executive's estate will be entitled to a proportionate number of the total number of RSUs granted. If an executive's employment is terminated for "cause" or an executive voluntarily resigns, all unvested RSUs will be forfeited upon termination. If an executive's employment is terminated "without cause" or "for good reason" prior to a change in control, the executive will be entitled to a proportionate number of the total RSUs that would have otherwise vested for the vesting period in which the termination occurs. If an executive's employment is terminated "without cause" or "for good reason" during the two years following a change in control, all remaining restrictions will lapse and the RSUs will become fully vested.
42
Stock Options
The stock options were granted to the Named Executive Officers under the LTIP, and represent part of the normal annual long-term incentive grants. Dividends or dividend equivalents are not payable on the stock options. Generally, one-third of the stock option award vests on each of the first, second and third anniversaries of the grant date. The off-cycle recruitment grant of stock options for Mr. Sheller vests ratably on each of the first, second, third and fourth anniversaries of the grant date. The off-cycle recruitment grant of stock options for Mr. Cup vests ratably on each of the first, second and third anniversaries of the grant date.
The stock options have an exercise price equal to the closing stock price on the grant date. The stock options can be exercised once vested but before their expiration ten years following the date they were granted. The vesting of the unvested stock options will be fully accelerated upon an executive's retirement or death more than one year after the grant date and the executives will have the full term to exercise the options. If an executive's employment is terminated for "cause" or an executive voluntarily resigns, all vested and unvested options are canceled (and are no longer exercisable) upon termination. Upon an executive's termination "without cause" or "for good reason" prior to a change in control, the executive will generally be entitled to a proportionate number of the options that would have otherwise vested for the vesting period in which the termination occurs and have three months to exercise these options. If an executive's employment is terminated "without cause" or "for good reason" during the two years following a change in control, all restrictions will lapse and the options will become fully vested and the executive will have three months to exercise the options.
43
Outstanding Equity Awards at Fiscal Year-End2015
|
|
|
Option Awards | Stock Awards | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Award Type(1) | Grant Date |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Option
Exercise Price ($) |
Option
Expiration Date |
Number of
Shares or Units of Stock That Have Not Vested (#) |
Market
Value of Shares or Units of Stock That Have Not Vested ($)(15) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(15) |
||||||||||||||||||||
Peter Kasper Jakobsen |
Stock Options(2) | 3/11/2009 | 27,341 | | 26.58 | 3/11/2019 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/24/2010 | 17,409 | | 46.30 | 2/24/2020 | ||||||||||||||||||||||||
|
Stock Options(6) | 3/2/2011 | 23,469 | | 58.86 | 3/2/2021 | ||||||||||||||||||||||||
|
Stock Options(6) | 3/2/2012 | 24,558 | | 78.26 | 3/2/2022 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/27/2013 | 42,908 | 21,456 | 74.65 | 2/27/2023 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/28/2014 | 24,549 | 49,100 | 81.55 | 2/28/2024 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/26/2015 | | 69,068 | 104.35 | 2/26/2025 | ||||||||||||||||||||||||
|
RSUs(8) | 3/2/2012 | 4,811 | 379,828 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/27/2013 | 12,608 | 995,402 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/28/2014 | 14,427 | 1,139,012 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/26/2015 | 13,530 | 1,068,194 | ||||||||||||||||||||||||||
|
Perf. Shares(12) | 2/27/2013 | 19,550 | 1,543,473 | | | ||||||||||||||||||||||||
|
Perf. Shares(13) | 2/28/2014 | 10,897 | 860,318 | 9,618 | 759,341 | ||||||||||||||||||||||||
|
Perf. Shares(14) | 2/26/2015 | | | 18,040 | 1,424,258 | ||||||||||||||||||||||||
|
75,823 | 5,986,227 | 27,658 | 2,183,599 | ||||||||||||||||||||||||||
Michel Cup |
Stock Options(7) |
9/1/2015 |
|
23,696 |
76.04 |
9/1/2025 |
||||||||||||||||||||||||
|
RSUs(8) | 9/1/2015 | 9,284 | 732,972 | | | ||||||||||||||||||||||||
|
9,284 | 732,972 | | | ||||||||||||||||||||||||||
Charles M. Urbain |
Stock Options(6) |
3/2/2011 |
19,898 |
|
58.86 |
3/2/2021 |
||||||||||||||||||||||||
|
Stock Options(6) | 3/2/2012 | 15,349 | | 78.26 | 3/2/2022 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/27/2013 | 11,798 | 5,902 | 74.65 | 2/27/2023 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/28/2014 | 5,400 | 10,803 | 81.55 | 2/28/2024 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/26/2015 | | 12,663 | 104.35 | 2/26/2025 | ||||||||||||||||||||||||
|
RSUs(8) | 3/2/2012 | 3,007 | 237,403 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/27/2013 | 3,467 | 273,720 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/28/2014 | 3,174 | 250,587 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/26/2015 | 2,481 | 195,875 | ||||||||||||||||||||||||||
|
Perf. Shares(12) | 2/27/2013 | 5,376 | 424,435 | | | ||||||||||||||||||||||||
|
Perf. Shares(13) | 2/28/2014 | 2,398 | 189,322 | 2,116 | 167,058 | ||||||||||||||||||||||||
|
Perf. Shares(14) | 2/26/2015 | | | 3,308 | 261,167 | ||||||||||||||||||||||||
|
19,903 | 1,571,342 | 5,424 | 428,225 | ||||||||||||||||||||||||||
Peter G. Leemputte |
Perf. Shares(12) |
2/27/2013 |
7,821 |
617,468 |
|
|
||||||||||||||||||||||||
|
Perf. Shares(13) | 2/28/2014 | 3,269 | 258,088 | | | ||||||||||||||||||||||||
|
11,090 | 875,556 | | | ||||||||||||||||||||||||||
Patrick M. Sheller |
Stock Options(5) |
2/2/2015 |
|
7,537 |
99.61 |
2/2/2025 |
||||||||||||||||||||||||
|
Stock Options(6) | 2/26/2015 | | 9,716 | 104.35 | 2/26/2025 | ||||||||||||||||||||||||
|
RSUs(10) | 2/2/2015 | 2,953 | 233,139 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/26/2015 | 1,904 | 150,321 | ||||||||||||||||||||||||||
|
Perf. Shares(14) | 2/26/2015 | | | 2,538 | 200,375 | ||||||||||||||||||||||||
|
4,857 | 383,460 | 2,538 | 200,375 | ||||||||||||||||||||||||||
James Jeffrey Jobe |
Stock Options(6) |
2/24/2010 |
15,668 |
|
46.30 |
2/24/2020 |
||||||||||||||||||||||||
|
Stock Options(6) | 3/2/2011 | 14,285 | | 58.86 | 3/2/2021 | ||||||||||||||||||||||||
|
Stock Options(6) | 3/2/2012 | 11,512 | | 78.26 | 3/2/2022 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/27/2013 | 8,580 | 4,293 | 74.65 | 2/27/2023 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/28/2014 | 3,510 | 7,022 | 81.55 | 2/28/2024 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/26/2015 | | 9,555 | 104.35 | 2/26/2025 | ||||||||||||||||||||||||
|
RSUs(8) | 3/2/2012 | 2,255 | 178,032 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/27/2013 | 2,522 | 199,112 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/28/2014 | 2,063 | 162,874 | ||||||||||||||||||||||||||
|
RSUs(11) | 10/1/2014 | 6,160 | 486,332 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/26/2015 | 1,872 | 147,794 | ||||||||||||||||||||||||||
|
Perf. Shares(12) | 2/27/2013 | 3,910 | 308,695 | | | ||||||||||||||||||||||||
|
Perf. Shares(13) | 2/28/2014 | 1,558 | 123,004 | 1,376 | 108,635 | ||||||||||||||||||||||||
|
Perf. Shares(14) | 2/26/2015 | | | 2,496 | 197,059 | ||||||||||||||||||||||||
|
20,340 | 1,605,843 | 3,872 | 305,694 | ||||||||||||||||||||||||||
|
44
|
|
|
Option Awards | Stock Awards | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Award Type(1) | Grant Date |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Option
Exercise Price ($) |
Option
Expiration Date |
Number of
Shares or Units of Stock That Have Not Vested (#) |
Market
Value of Shares or Units of Stock That Have Not Vested ($)(15) |
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(15) |
||||||||||||||||||||
Graciela Monteagudo |
Stock Options(3) |
6/1/2012 | 8,454 | | 78.15 | 6/1/2022 | ||||||||||||||||||||||||
|
Stock Options(4) | 6/1/2012 | 8,646 | 2,882 | 78.15 | 6/1/2022 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/27/2013 | 8,460 | 4,231 | 74.65 | 2/27/2023 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/28/2014 | 3,927 | 7,857 | 81.55 | 2/28/2024 | ||||||||||||||||||||||||
|
Stock Options(6) | 2/26/2015 | | 9,555 | 104.35 | 2/26/2025 | ||||||||||||||||||||||||
|
RSUs(8) | 6/1/2012 | 1,656 | 130,741 | ||||||||||||||||||||||||||
|
RSUs(9) | 6/1/2012 | 1,129 | 89,135 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/27/2013 | 2,486 | 196,270 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/28/2014 | 2,309 | 182,296 | ||||||||||||||||||||||||||
|
RSUs(8) | 2/26/2015 | 1,872 | 147,794 | ||||||||||||||||||||||||||
|
Perf. Shares(12) | 2/27/2013 | 3,855 | 304,352 | | | ||||||||||||||||||||||||
|
Perf. Shares(13) | 2/28/2014 | 1,744 | 137,689 | 1,539 | 121,504 | ||||||||||||||||||||||||
|
Perf. Shares(14) | 2/26/2015 | | | 2,496 | 197,059 | ||||||||||||||||||||||||
|
15,051 | 1,188,277 | 4,035 | 318,563 |
45
Option Exercises and Stock Vested2015
The following table presents information regarding the exercise of stock options by Named Executive Officers during 2015 and the vesting during 2015 of other stock awards previously granted to the Named Executive Officers.
|
Option Awards(1) | Stock Awards(2) | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name
|
Number of
Shares Acquired on Exercise (#) |
Value Realized
on Exercise ($) |
Number of
Shares Acquired on Vesting (#) |
Value Realized
on Vesting ($) |
|||||||||
Peter Kasper Jakobsen |
| | 15,833 | 1,658,113 | |||||||||
Michel Cup |
| | | | |||||||||
Charles M. Urbain |
| | 10,920 | 1,143,512 | |||||||||
Peter G. Leemputte |
146,519 | 6,276,140 | 48,926 | 4,946,913 | |||||||||
Patrick M. Sheller |
| | | | |||||||||
James Jeffrey Jobe |
| | 8,065 | 844,554 | |||||||||
Graciela Monteagudo |
| | 4,996 | 514,575 |
Name
|
Date of
Exercise |
|
Number of
Shares Acquired Upon Exercise |
Exercise
Price |
Closing Price of
Common Stock on Exercise Date |
Total Value
Realized |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter G. Leemputte |
4/27/2015 | 94,958 | $26.58 - $81.55 | $ | 96.22 | $ | 4,411,154 | |||||||||||
|
6/5/2015 | 4,083 | $74.65 - $81.55 | $ | 94.84 | $ | 69,533 | |||||||||||
|
7/1/2015 | 11,869 | $26.58 | $ | 90.96 | $ | 764,126 | |||||||||||
|
7/17/2015 | 11,869 | $46.30 | $ | 87.79 | $ | 492,445 | |||||||||||
|
8/4/2015 | 11,870 | $26.58 - $81.55 | $ | 87.75 | $ | 292,740 | |||||||||||
|
8/14/2015 | 11,870 | $26.58 - $81.55 | $ | 83.83 | $ | 246,142 | |||||||||||
|
Total: | 146,519 | $ | 6,276,140 |
46
Name
|
Type of
Award |
Date of Vest |
|
Number of
Shares Acquired Upon Vesting |
Closing Price
of Common Stock on Vesting Date |
Total Value
Realized |
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
RSUs | 3/2/2015 | 4,597 | $ | 104.64 | $ | 481,030 | |||||||||||
|
Perf. Shares | 2/27/2015 | 11,236 | $ | 104.76 | $ | 1,177,083 | |||||||||||
|
Total: | 15,833 | $ | 1,658,113 | ||||||||||||||
Charles M. Urbain |
RSUs |
3/2/2015 |
3,898 |
$ |
104.64 |
$ |
407,887 |
|||||||||||
|
Perf. Shares | 2/27/2015 | 7,022 | $ | 104.76 | $ | 735,625 | |||||||||||
| | | | | | | | | | | | | | | | | | |
|
Total: | 10,920 | $ | 1,143,512 | ||||||||||||||
Peter G. Leemputte |
RSUs |
1/3/2015 |
24,733 |
$ |
99.94 |
$ |
2,471,816 |
|||||||||||
|
RSUs | 3/2/2015 | 5,796 | $ | 104.64 | $ | 606,493 | |||||||||||
|
Perf. Shares | 2/27/2015 | 10,533 | $ | 104.76 | $ | 1,103,437 | |||||||||||
|
RSUs | 5/31/2015 | 7,864 | $ | 97.30 | $ | 765,167 | |||||||||||
|
Total: | 48,926 | $ | 4,946,913 | ||||||||||||||
James Jeffrey Jobe |
RSUs |
3/2/2015 |
2,798 |
$ |
104.64 |
$ |
292,783 |
|||||||||||
|
Perf. Shares | 2/27/2015 | 5,267 | $ | 104.76 | $ | 551,771 | |||||||||||
| | | | | | | | | | | | | | | | | | |
|
Total: | 8,065 | $ | 844,554 | ||||||||||||||
Graciela Monteagudo |
RSUs |
6/1/2015 |
1,129 |
$ |
96.96 |
$ |
109,468 |
|||||||||||
|
Perf. Shares | 2/27/2015 | 3,867 | $ | 104.76 | $ | 405,107 | |||||||||||
|
Total: | 4,996 | $ | 514,575 |
47
Name
|
Plan Name |
Number of
Years Credited Service (#)(1) |
Present Value of
Accumulated Benefit ($) |
Payments During
Last Fiscal Year ($) |
||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
Benefit Equalization Plan | 0.360 | 98,824 | | ||||||||
|
Retirement Income Plan | 0.360 | 18,501 | | ||||||||
|
Key International Plan | 11.198 | 3,211,767 | | ||||||||
|
3,329,092 | | ||||||||||
Michel Cup |
N/A |
|
|
|
||||||||
| | | | | | | | | | | | |
|
| | ||||||||||
Charles M. Urbain |
Benefit Equalization Plan |
19.770 |
4,423,797 |
|
||||||||
|
Retirement Income Plan | 19.770 | 1,301,582 | | ||||||||
|
5,725,379 | | ||||||||||
Peter G. Leemputte |
Benefit Equalization Plan |
0.900 |
222,934 |
|
||||||||
|
Retirement Income Plan | 0.900 | 51,554 | | ||||||||
| | | | | | | | | | | | |
|
274,488 | | ||||||||||
Patrick M. Sheller |
N/A |
|
|
|
||||||||
|
| | ||||||||||
James Jeffrey Jobe |
Benefit Equalization Plan |
21.270 |
2,178,058 |
|
||||||||
|
Retirement Income Plan | 21.270 | 1,221,038 | | ||||||||
| | | | | | | | | | | | |
|
3,399,096 | | ||||||||||
Graciela Monteagudo |
N/A |
|
|
|
||||||||
|
| |
The present values disclosed in the Pension Benefits Table above as of December 31, 2015 were based on the following assumptions:
Retirement Income Plan
The Retirement Income Plan is a defined benefit pension plan that provides income for employees after retirement. The Retirement Income Plan is a tax-qualified plan, as defined under Section 401(a) of the Code. The benefit is calculated based on the employee's final average compensation and years of service. The Retirement Income Plan was closed to new participants in 2009, which means that no person hired after February 9, 2009 is eligible for participation in this plan. Employees who participate in the Executive Performance Incentive Plan or
48
whose pay or benefits exceed the IRS qualified plan limits are eligible to participate in the Benefit Equalization PlanRetirement Plan. The key plan provisions of the Retirement Income Plan are as follows:
Benefit Equalization PlanRetirement Plan
The Benefit Equalization PlanRetirement Plan is a non-qualified deferred compensation plan that provides income for employees after retirement in excess of the benefits payable under the qualified Retirement Income Plan. The benefit is calculated using the same formula as the Retirement Income Plan, but without the limits on compensation and benefits imposed under Section 401(a)(17) and Section 415(b) of the Code. The provisions are the same as those above for the Retirement Income Plan, except for the following:
Key International Pension Plan
The Key International Pension Plan is a non-qualified plan. This plan was closed to new participants in 2009. The plan provides income for these employees after retirement.
The benefit is calculated based on the employee's final average compensation and years of service. The key plan provisions are as follows:
49
Non-Qualified Deferred Compensation2015
Name
|
Executive
Contributions in Last Fiscal Year ($)(1) |
Company
Contributions in Last Fiscal Year ($)(2) |
Aggregate
Earnings in Last Fiscal Year ($)(3) |
Aggregate
Withdrawals/ Distributions ($) |
Aggregate
Balance at Last Fiscal Year End ($)(4) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
106,431 | 189,369 | (8,003 | ) | | 938,527 | ||||||||||
Michel Cup |
| 2,827 | | | 2,827 | |||||||||||
Charles M. Urbain |
78,397 | 72,534 | 3,642 | | 1,795,790 | |||||||||||
Peter G. Leemputte |
36,867 | 27,650 | 9,601 | (1,072,838 | ) | | ||||||||||
Patrick M. Sheller |
| 14,712 | | | 14,712 | |||||||||||
James Jeffrey Jobe |
30,799 | 49,640 | 2,417 | | 629,728 | |||||||||||
Graciela Monteagudo |
41,092 | 70,062 | (2,581 | ) | | 294,174 |
All of the amounts shown in the Non-Qualified Deferred Compensation table, above, were deferred under the Benefit Equalization PlanRetirement Savings Plan described below.
Retirement Savings Plan
The Retirement Savings Plan is a defined contribution plan designed to allow participants to save for retirement and benefit from Company contributions and tax advantages available through the plan. The Retirement Savings Plan is a tax-qualified 401(k) plan, as defined under Section 401(a) of the Code. Employees who participated in the Executive Performance Incentive Plan or whose pay or benefits exceed the IRS qualified plan limits under the Retirement Savings Plan are eligible for the Benefit Equalization PlanRetirement Savings Plan. The key plan provisions of the Retirement Savings Plan are as follows:
Participants are immediately eligible for Company contributions. Eligible pay is defined as an employee's current base salary or wages and annual bonus before any pre-tax savings are deducted. Employees are eligible to contribute from 1% to 25% on a pre-tax or after-tax basis or a combination of both to the plan. Employees may make additional pre-tax "catch-up" contributions at or after age 50. The Company will make matching contributions of $1 for each $1 on the first 6% of eligible pay (base pay plus annual bonus) that the employee contributes. The Company matching contribution is on pre-tax and/or after-tax dollars. The plan provides additional Company contributions of 2%, 3% or 4% of eligible pay (base pay plus bonus) to active employees based on employee points (age plus service) as follows:
Less than 40 points: |
2 | % | ||
40 - 59 points: |
3 | % | ||
60 or more points: |
4 | % |
Employee contributions are always 100% vested. Company contributions become 100% vested as soon as they are made on the participant's behalf and regardless of years of service. Participants are able to invest their own contributions and Company contributions into a variety of investment alternatives at their own discretion.
50
Benefit Equalization PlanRetirement Savings Plan
The Benefit Equalization PlanRetirement Savings Plan is a non-qualified deferred compensation plan designed to allow participants to save for retirement and benefit from Company contributions and tax advantages available through the plan in excess of the benefits payable under the qualified Retirement Savings Plan. The key plan provisions are the same as those described above for the Retirement Savings Plan, except for the limits on compensation and benefits imposed on the plan under Section 401(a)(17) and Section 415(b) of the Code.
Potential Payments Upon Termination or Change in Control2015
Generally, we have no employment contracts with our executives, unless required by local law or practice. Therefore, post-termination benefits are typically addressed by the plan or award agreement relating to each element of compensation. For example, our equity award agreements set forth their treatment upon an executive's termination of employment. We do not provide for "single trigger" vesting of awards upon a change in control. However, pursuant to the terms of our equity award agreements, there is an exception to this general treatment if any of these equity awards would be cancelled or otherwise cease to be outstanding upon a change in control.
Separation Compensation of Former Executive Vice President and Chief Financial Officer. On March 4, 2015, we announced that Peter G. Leemputte, our then-current Executive Vice President and Chief Financial Officer, would be leaving the Company. The Company entered into a letter agreement on March 4, 2015, as amended on May 15, 2015, (the "Leemputte Agreement") with Mr. Leemputte pursuant to which Mr. Leemputte separated from service with the Company effective as of May 31, 2015 (the "separation date"). Under the Leemputte Agreement, Mr. Leemputte received total cash severance of $2,007,250, comprised of (a) $177,042 in salary continuation payments, (b) accrued and unused vacation of $35,019, and (c) $1,795,189 in payments to be made through October, 2016. Pursuant to the agreement, Mr. Leemputte is to receive additional cash severance of $320,361 to be paid in semi-monthly installments through the remaining 18 months following his separation date, through March 2017, subject to certain continuing cooperation requirements set forth in the general release and special executive terms signed by Mr. Leemputte. As of the separation date, Mr. Leemputte's outstanding equity awards were prorated for length of service completed in the respective vesting period as follows:
Other Named Executive Officers. The discussion below describes payments that are due the Named Executive Officers (other than Mr. Leemputte) in the event of various termination scenarios or a change in control assuming an effective date of December 31, 2015. To the extent payments and benefits are generally available to salaried employees on a non-discriminatory basis, they are excluded from the tabular disclosures which follow.
None of the tables below reflect payments due to the Named Executive Officers in the event that such Named Executive Officer leaves the Company on a voluntary basis (without good reason or not in connection with a constructive termination). We do not offer any payments to salaried employees, including the Named Executive Officers, upon a voluntary termination other than those that are vested prior to or at the time of termination.
51
Retirement, Death or Disability
Name
|
Annual
Incentive Award ($)(2) |
Stock Options
($)(3) |
Restricted
Stock Units ($)(4) |
Long-Term
Performance Awards ($)(5) |
Total
($) |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Retirement(1): |
||||||||||||||||
Peter Kasper Jakobsen |
| | | | | |||||||||||
Michel Cup |
| | | | | |||||||||||
Charles M. Urbain |
166,299 | 25,379 | 536,702 | 613,757 | 1,342,137 | |||||||||||
Patrick M. Sheller |
| | | | | |||||||||||
James Jeffrey Jobe |
104,934 | 18,460 | 538,360 | 431,699 | 1,093,453 | |||||||||||
Graciela Monteagudo |
| | | | | |||||||||||
Death: |
||||||||||||||||
Peter Kasper Jakobsen |
400,000 | 92,261 | 1,593,369 | 2,403,791 | 4,489,421 | |||||||||||
Michel Cup |
69,417 | | | | 69,417 | |||||||||||
Charles M. Urbain |
166,299 | 25,379 | 536,702 | 613,757 | 1,342,137 | |||||||||||
Patrick M. Sheller |
125,125 | | | | 125,125 | |||||||||||
James Jeffrey Jobe |
104,934 | 18,460 | 538,360 | 431,699 | 1,093,453 | |||||||||||
Graciela Monteagudo |
319,825 | 18,193 | 419,856 | 442,041 | 1,199,915 | |||||||||||
Disability: |
||||||||||||||||
Peter Kasper Jakobsen |
400,000 | 92,261 | 3,582,435 | 2,403,791 | 6,478,487 | |||||||||||
Michel Cup |
69,417 | 68,955 | 732,972 | | 871,344 | |||||||||||
Charles M. Urbain |
166,299 | 25,379 | 957,585 | 613,757 | 1,763,020 | |||||||||||
Patrick M. Sheller |
125,125 | | 383,460 | | 508,585 | |||||||||||
James Jeffrey Jobe |
104,934 | 18,460 | 1,174,144 | 431,699 | 1,729,237 | |||||||||||
Graciela Monteagudo |
319,825 | 18,193 | 746,235 | 442,041 | 1,526,294 |
The following benefits are generally available to all salaried employees, including the Named Executive Officers, upon full retirement at age 65 (or age 55 with 10 or more years of service), death or disability:
52
Involuntary Termination without Cause or Termination with Good Reason
The Company's Named Executive Officers were eligible to receive severance payments and benefits under the Executive Severance Plan if their employment was terminated for any of the following reasons:
Name
|
Cash
Severance ($)(1) |
Annual
Incentive Award ($)(2) |
Stock
Options ($)(3) |
Restricted
Stock Units ($)(4) |
Long-Term
Performance Awards ($)(5) |
Other
Benefits and Severance Payments ($)(6) |
Total
($) |
|||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
4,376,923 | 400,000 | 77,602 | 1,818,534 | 2,403,791 | 46,632 | 9,123,482 | |||||||||||||||
Michel Cup |
278,429 | 69,417 | 7,613 | 60,713 | | 45,754 | 461,926 | |||||||||||||||
Charles M. Urbain |
1,594,073 | 166,299 | 21,345 | 577,993 | 613,757 | 45,616 | 3,019,083 | |||||||||||||||
Patrick M. Sheller |
605,649 | 125,125 | | 84,634 | | 36,122 | 851,530 | |||||||||||||||
James Jeffrey Jobe |
1,182,988 | 104,934 | 15,527 | 569,545 | 431,699 | 45,771 | 2,350,464 | |||||||||||||||
Graciela Monteagudo |
1,279,218 | 319,825 | 15,304 | 451,041 | 442,041 | 53,968 | 2,561,397 |
An executive whose employment is terminated by the Company without Cause or by the executive with Good Reason and who complies with the applicable notice provisions in the case of a Good Reason termination, would have been eligible for the following:
Additionally, executives who are expatriates are eligible for financial counseling and repatriation relocation benefits based on our standard expatriate relocation policy. However, the policy calls for these to be reasonable
53
and customary in amount (e.g., air tickets home and tax preparation services). The policy does not establish a maximum and the Company cannot estimate what value these benefits would have.
For purposes of the Executive Severance Plan, "Cause" means the following:
"Cause" will be interpreted by the Compensation and Management Development Committee in its sole discretion and such interpretation will be conclusive and binding.
For purposes of the Executive Severance Plan, "Good Reason" means the occurrence of any of the following events without the executive's consent:
Change in Control and Involuntary Termination Without Cause or Termination with Good Reason
The Company's Named Executive Officers are eligible to receive enhanced benefits under the Executive Change in Control Plan in the event of a covered termination following a change in control. The occurrence of a change in control alone is generally insufficient to trigger benefits under the Executive Change in Control Plan. However, pursuant to the terms of our equity award agreements, there is an exception to this general treatment if any of these equity awards would be cancelled or otherwise cease to be outstanding upon a change in control.
To trigger benefits under the Executive Change in Control Plan, there must be both a "Change in Control" of the Company and either (1) a subsequent involuntary termination by the Company without Cause or (2) a termination by the executive with Good Reason. Thus, the only benefits that an executive would be entitled to upon a change in control alone are those that are vested at the time of the change in control.
The Company's Named Executive Officers were eligible to receive severance payments and benefits under the Executive Change in Control Plan if their employment was terminated within two years following a Change in Control for any of the following reasons:
54
Name
|
Cash
Severance ($)(1) |
Annual
Incentive Award ($)(2) |
Stock
Options ($)(3) |
Restricted
Stock Units ($)(4) |
Long-Term
Performance Awards ($)(5) |
Supplemental
Retirement Benefits ($)(6) |
Other
Benefits and Severance Payments ($)(7) |
Reduction in
Severance to Eliminate Excise Tax(8) |
Total
($) |
|||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Peter Kasper Jakobsen |
6,450,000 | 1,150,000 | 92,261 | 3,582,436 | 4,587,390 | 645,000 | 62,556 | (2,843,707 | ) | 13,725,936 | ||||||||||||||||||
Michel Cup |
1,796,666 | 198,333 | 68,955 | 732,972 | | 161,700 | 61,078 | | 3,019,704 | |||||||||||||||||||
Charles M. Urbain |
2,063,892 | 431,946 | 25,379 | 957,585 | 1,041,982 | 217,615 | 60,893 | | 4,799,292 | |||||||||||||||||||
Patrick M. Sheller |
1,650,000 | 325,000 | | 383,460 | 200,375 | 148,500 | 51,353 | | 2,758,688 | |||||||||||||||||||
James Jeffrey Jobe |
1,529,625 | 299,813 | 18,460 | 1,174,144 | 737,393 | 152,963 | 60,986 | | 3,973,384 | |||||||||||||||||||
Graciela Monteagudo |
1,653,317 | 316,659 | 18,193 | 746,236 | 760,604 | 148,799 | 69,203 | (308,366 | ) | 3,404,645 |
An executive whose employment is terminated without Cause or with Good Reason within two years following a Change in Control would be eligible for the following:
For purposes of the Executive Change in Control Plan, "Cause" means the following:
55
For purposes of the Executive Change in Control Plan, "Good Reason" means the occurrence of any of the following events without the executive's consent:
For purposes of the Executive Change in Control Severance Plan, "Change in Control" means the occurrence of any of the following events:
56
directly or indirectly, more than fifty percent (50%) of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of members of the board of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity surviving or resulting from such Business Combination (including an entity that, as a result of such transaction, owns all or substantially all of the common stock or the voting securities of the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding MJN Common Shares and the Outstanding MJN Voting Securities, as the case may be, (ii) no Person (excluding the Company or any employee benefit plan (or related trust) of the Company or such entity surviving or resulting from such Business Combination) beneficially owns, directly or indirectly, thirty percent (30%) or more of, respectively, the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) of the entity surviving or resulting from such Business Combination (or any parent thereof) or the combined voting power of the then-outstanding voting securities of such entity (or any parent thereof) entitled to vote generally in the election of members of the board of directors (or, for a non-corporate entity, equivalent governing body) and (iii) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity surviving or resulting from such Business Combination (or any parent thereof) were members of the Board at the time of the execution of the initial agreement or action of the Board providing for such Business Combination;
57
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table provides certain information as of December 31, 2015 regarding common stock that may be issued under the LTIP, our one equity compensation plan.
Plan Category
|
Number of Securities to
be Issued Upon Exercise of Outstanding Options, Warrants and Rights |
Weighted Average
Exercise Price of Outstanding Options, Warrants and Rights |
Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in the First Column) |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity Compensation Plans Approved by Security Holders |
2,740,569 | (1) | $ | 75.63 | (2) | 18,944,466 | (3) | |||
Equity Compensation Plans Not Approved by Security Holders |
| | | |||||||
| | | | | | | | | | |
Total |
2,740,569 | $ | 75.63 | 18,944,466 |
58
Management is responsible for the preparation, presentation and integrity of the Company's consolidated financial statements and its internal control over financial reporting. The independent registered public accounting firm of Deloitte & Touche is responsible for performing an independent integrated audit of the Company's consolidated financial statements and the effectiveness of its internal control over financial reporting. The Audit Committee's responsibility is to monitor and oversee these processes.
In addition to fulfilling its oversight responsibilities as set forth in its charter and as further described above in the section titled "Committees of the Board of DirectorsAudit Committee," the Audit Committee reports as follows:
Based on the review and discussions referred to above, the Audit Committee recommended to the Board that the Company's audited financial statements referred to above be included in its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 for filing with the SEC.
Members of the Audit Committee, | ||||
|
|
|
|
Peter G. Ratcliffe, Chairman Kimberly A. Casiano Michael A. Sherman Robert S. Singer |
59
Fees Paid to Independent Registered Public Accounting Firm
The table set forth below presents the fees for professional audit services rendered by Deloitte & Touche in connection with the integrated audits of our consolidated financial statements for the years ended December 31, 2015 and 2014, and fees for other services rendered by Deloitte & Touche and its affiliates during these periods
|
2015 | 2014 | |||||
---|---|---|---|---|---|---|---|
Audit Fees |
$ | 3,859,110 | $ | 3,924,510 | |||
Audit-Related Fees |
81,321 | 88,600 | |||||
Tax Fees |
146,475 | 86,680 | |||||
All Other Fees |
| 234,000 | |||||
| | | | | | | |
Total |
$ | 4,086,906 | $ | 4,333,790 |
Audit Fees for 2015 and 2014 include fees for services rendered for the audits of our consolidated financial statements and of our internal control over financial reporting, reviews of our quarterly financial statements, and statutory audits.
Audit-Related Fees for 2015 include fees for services rendered related to the issuance of a comfort letter and certain regulatory attestation reports. For 2014, fees were for services rendered related to the issuance of a comfort letter, the audit of our Canadian pension plan, and certain regulatory attestation reports.
Tax Fees for 2015 and 2014 were for services rendered related to tax compliance and advisory services, including transfer pricing analyses, VAT analyses, and tax audit support services.
All Other Fees for 2014 include fees for services rendered related to a review of our financial shared services organization.
Pre-Approval of Audit and Permissible Non-Audit Services
The Audit Committee pre-approved all audit and non-audit services provided by Deloitte & Touche and its affiliates during 2015 in accordance with our policy described below.
The Audit Committee has established a policy to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm consistent with applicable SEC rules. Our independent registered public accounting firm is generally prohibited from performing any management consulting projects, or from providing tax consulting services relating to transactions or proposals in which the sole purpose may be tax avoidance or for which the tax treatment may not be supported by the Internal Revenue Code. Prior to the engagement of our independent registered public accounting firm for the next year's audit, management submits an aggregate of services expected to be rendered during that year for each of the four categories of services described above to the Audit Committee for approval. Prior to engagement, the Audit Committee pre-approves these services by category of service. The fees are budgeted by category of service and the Audit Committee receives periodic reports from management and our independent registered public accounting firm on actual fees versus the budget by category of service. During the year, circumstances may arise when it may become necessary to engage our independent registered public accounting firm for additional services not contemplated in the pre-approval. In those instances, the Audit Committee requires specific pre-approval before engaging our independent registered public accounting firm.
The Audit Committee may delegate pre-approval authority to its Chair. The Chair is required to report, for informational purposes, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting.
60
This Proxy Statement contains three proposals by the Board. Proposal No. 1 requests the election of 13 directors to the Board. Proposal No. 2 requests approval, on an advisory basis, of the compensation paid to our Named Executive Officers. Proposal No. 3 requests the ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm in 2016. Each of these proposals is discussed in more detail below.
PROPOSAL 1ELECTION OF DIRECTORS
The Board currently consists of 13 members. The directors serve one-year terms. The Board has nominated each of our 13 current directors whose terms expire at the Annual Meeting for re-election as directors. Information regarding the nominees for director is set forth under "Board of Directors and Corporate GovernanceBoard of Directors," beginning on page 7.
In an uncontested election, our bylaws require directors to be elected by a majority of the votes cast by holders of shares at any meeting of stockholders on the election of directors.
All of the nominees have indicated their willingness to serve if elected, but if any should be unable or unwilling to stand for election, proxies may be voted for a substitute nominee designated by the Board. Unless proxy cards are otherwise marked, the individuals named as proxies intend to vote the shares represented by proxy in favor of all of the Board's nominees.
The Board of Directors recommends a vote FOR the election of each of the director nominees.
PROPOSAL 2ADVISORY APPROVAL OF THE COMPENSATION PAID TO OUR NAMED EXECUTIVE OFFICERS
We are providing our stockholders with the opportunity to cast an advisory vote to approve the compensation paid to our Named Executive Officers as described below. We believe that it is appropriate to seek the views of stockholders on the design and effectiveness of our executive compensation program.
As described under "Executive CompensationCompensation Discussion and Analysis," our executive compensation program is designed to attract, motivate and retain our Named Executive Officers, who are critical to our success. Under this program, our Named Executive Officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals and the realization of increased stockholder value.
We are asking our stockholders to indicate their support for the compensation paid to our Named Executive Officers as disclosed in this Proxy Statement pursuant to the SEC's compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis and the accompanying compensation tables and related narrative in this Proxy Statement). This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement. Please read the "Compensation Discussion and Analysis" beginning on page 24 of this Proxy Statement and the corresponding compensation tables and related narrative set forth on pages 39-57 of this Proxy Statement for additional details about our executive compensation program, including information about the fiscal year 2015 compensation of our Named Executive Officers.
As an advisory vote, this proposal is not binding upon the Company. However, the Compensation and Management Development Committee, which is responsible for designing and administering the Company's executive compensation program, values the opinions expressed by stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for our executive officers.
At the Company's 2011 annual meeting of stockholders, the Company's stockholders recommended, on an advisory basis, holding an advisory vote on the compensation paid to our Named Executive Officers every year. Based on this determination which was consistent with the Board's recommendation, the Board agreed that it will hold an advisory vote on the compensation of our Named Executive Officers every year until the next required vote on the frequency of such votes. As such, following the advisory vote to approve the compensation paid to our
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Named Executive Officers that will take place at the Annual Meeting, the next advisory vote on executive compensation will occur at the Company's 2017 annual meeting of stockholders.
The Board strongly endorses the Company's executive compensation program and recommends that stockholders vote in favor of the following resolution:
RESOLVED, that the compensation paid to the Company's Named Executive Officers as disclosed pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and any related discussion as disclosed in this proxy statement, is hereby APPROVED.
Unless proxy cards are otherwise marked, the individuals named as proxies intend to vote the shares represented by proxy in favor of approving the compensation paid to our Named Executive Officers.
The Board of Directors recommends a vote FOR the approval, on an advisory basis, of the compensation
paid to our Named Executive Officers as disclosed pursuant to the SEC's compensation disclosure rules in this Proxy Statement.
PROPOSAL 3RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
In accordance with its charter, the Audit Committee of the Board has appointed Deloitte & Touche as our independent registered public accounting firm for 2016. The Audit Committee requests that our stockholders ratify the appointment. Deloitte & Touche served as our independent registered public accounting firm in 2015. One or more representatives of Deloitte & Touche will be present at the Annual Meeting to respond to appropriate questions and to make a statement if they so desire.
Stockholder ratification of the selection of Deloitte & Touche as our independent registered public accounting firm is not required by our bylaws or otherwise. However, the Board is submitting the selection of Deloitte & Touche to the stockholders for ratification as a matter of good corporate governance practice. Furthermore, if the stockholders do not ratify the appointment of Deloitte & Touche, the Audit Committee will consider the selection of another independent registered public accounting firm for 2017 and future years. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.
Unless proxy cards are otherwise marked, the persons named as proxies intend to vote the shares represented by proxy in favor of the ratification of the appointment of Deloitte & Touche as our independent registered public accounting firm.
The Board of Directors recommends a vote FOR the ratification of the appointment of Deloitte & Touche
as our independent registered public accounting firm for 2016.
Management is not aware of any other matters that will be presented at the Annual Meeting, and our bylaws do not allow proposals to be presented at the meeting unless they were properly presented to us before January 1, 2016. If any other matters that require a vote properly come before the stockholders at the 2016 Annual Meeting, it is the intention of the proxy holders to vote the shares represented by proxy on such matters in accordance with the recommendation of the Board or, in the absence of such recommendation, in their best judgment.
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MAP AND DIRECTIONS TO
2016 ANNUAL MEETING OF STOCKHOLDERS OF MEAD JOHNSON NUTRITION COMPANY
The Glen Club
2901 W. Lake Avenue
Glenview, Illinois 60026
From Downtown Chicago
I-90/I-94 West approximately 7 miles; I-90 and I-94 split at this pointContinue on I-94 West approximately 8 milesExit Lake Ave. WestDrive west 3 miles to Patriot Blvd.Turn right (north)Drive north 1 mile (past stop sign at Chestnut) to West Lake AveTurn left (west)Drive West on West Lake Ave.Entrance to The Glen Club is approximately 200 yards on the left.
From O'Hare Airport
I-190 East to I-294 North toward WisconsinContinue on I-294 North approximately 8 milesExit Willow Rd. EastDrive east 2.3 miles to Patriot Blvd.Turn right (south) and continue on for approximately 0.8 miles to West Lake Ave.Turn right (west)Drive West on West Lake Ave.Entrance to The Glen Club is approximately 200 yards on the left.
From the West
I-90 East to I-294 North toward WisconsinContinue on I-294 North approximately 8 milesExit Willow Rd. EastDrive east 2.3 miles to Patriot Blvd.Turn right (south) and continue on for approximately 0.8 miles to West Lake Ave.Turn right (west)Drive West on West Lake Ave.Entrance to The Glen Club is approximately 200 yards on the left.
From the North
I-94 EastKeep right and merge on to I-294 South toward Indiana/O'HareContinue on I-294 South approximately 3.5 milesExit Willow Rd. towards Northbrook/GlenviewTurn left (east) and continue on for approximately 2.3 miles to Patriot Blvd.Turn right (south) and continue on for approximately 0.8 miles to West Lake Ave.Turn right (west)Drive West on West Lake Ave.Entrance to The Glen Club is approximately 200 yards on the left.
From the South
I-294 North toward WisconsinExit Willow Rd. EastDrive east 2.3 miles to Patriot Blvd.Turn right (south) and continue on for approximately 0.8 miles to West Lake Ave.Turn right (west)Drive West on West Lake Ave.Entrance to The Glen Club is approximately 200 yards on the left.
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Daylight Time, Tuesday, May 10, 2016. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. MEAD JOHNSON NUTRITION COMPANY 2701 PATRIOT BOULEVARD GLENVIEW, IL 60026 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Daylight Time, Tuesday, May 10, 2016. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: E03432-P73356 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. MEAD JOHNSON NUTRITION COMPANY The Board of Directors recommends a vote "FOR" each director nominee in Proposal 1, "FOR" Proposal 2 and "FOR" Proposal 3. 1. Election of Directors Nominees: For Against Abstain 1a. Steven M. Altschuler, M.D. ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain 1b. Howard B. Bernick ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! 1i. Peter Kasper Jakobsen 1c. Kimberly A. Casiano 1j. Peter G. Ratcliffe 1d. Anna C. Catalano 1k. Michael A. Sherman 1e. Celeste A. Clark, Ph.D. 1l. Elliott Sigal, M.D., Ph.D. 1f. James M. Cornelius 1m. Robert S. Singer 1g. Stephen W. Golsby 2. Advisory approval of named executive officer compensation 1h. Michael Grobstein 3. The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for 2016 For address changes and/or comments, please check this box and write them on the back where indicated. YesNo HOUSEHOLDING ELECTION - Please indicate if you consent ! Yes ! No ! ! Please indicate if you plan to attend this meeting. to receive certain future investor communications in a single package per household. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
2701 Patriot Boulevard Glenview, Illinois 60026 (847) 832-2420 April 4, 2016 Dear Fellow Stockholder: We are pleased to invite you to attend our Annual Meeting of Stockholders (the "Annual Meeting") to be held at The Glen Club, 2901 W. Lake Avenue, Glenview, Illinois 60026, on Wednesday, May 11, 2016, at 9:00 a.m. Central Daylight Time. Details of the business to be conducted at the Annual Meeting are included in the attached Notice of Annual Meeting of Stockholders and Proxy Statement. Whether or not you plan to attend in person, you can ensure that the shares are represented at the Annual Meeting by promptly voting and submitting your proxy by Internet or by telephone or by signing, dating and returning your proxy card in the enclosed envelope. If you attend the Annual Meeting, you may revoke your proxy and vote in person. Sincerely, James M. Cornelius Chairman of the Board of Directors Peter Kasper Jakobsen President and Chief Executive Officer Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 11, 2016 The Proxy Statement relating to our 2016 Annual Meeting of Stockholders, the Proxy Card and our Annual Report on Form 10-K for the year ended December 31, 2015 are available at www.meadjohnson.com/proxymaterials. E03432-P73356 MEAD JOHNSON NUTRITION COMPANY This Proxy and Voting Instruction Card is solicited on behalf of the Board of Directors for the Annual Meeting of Stockholders on May 11, 2016 The stockholder(s) hereby appoint(s) Patrick M. Sheller and Erin R. McQuade, and each of them, as proxies, each with the power to appoint his/her substitute, and hereby authorize(s) them to represent and to vote all of the shares of common stock of MEAD JOHNSON NUTRITION COMPANY that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 a.m. CDT on May 11, 2016, at The Glen Club, 2901 W. Lake Avenue, Glenview, Illinois 60026, as designated on the reverse side of this proxy and voting instruction card and in their discretion with respect to any other matters that may properly come before the Annual Meeting of Stockholders and any adjournment or postponement thereof. This card also provides voting instructions for any shares of common stock held on the undersigned's behalf in the Mead Johnson & Company, LLC Retirement Savings Plan and/or the Mead Johnson Nutrition (Puerto Rico) Inc. Retirement Savings Plan. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted in accordance with the Board of Directors' recommendations. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed and dated on reverse side Address Changes/Comments:
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